[Congressional Record (Bound Edition), Volume 150 (2004), Part 8]
[Senate]
[Pages 10515-10576]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
 By Mr. DASCHLE (for himself, Mr. Johnson, Mr. Conrad, Mr. Wyden, and 
                        Mr. Graham of Florida):

  S. 2451. A bill to amend the agricultural Marketing Act of 1946 to 
restore the application date for country of origin labeling; read the 
first time.
  Mr. DASCHLE. Mr. President, today the Washington Post reported that 
the United States Department of Agriculture secretly allowed American 
meatpackers to resume imports of ground and processed beef from Canada 
last September, just weeks after Secretary Veneman publicly reaffirmed 
the Department's ban on such importation as a result of mad cow disease 
being found in Canadian-born cattle.
  The article states that a total of 33 million pounds of Canadian 
processed beef came into the United States and went straight to 
American consumers under a series of undisclosed permits USDA issued to 
the meatpackers.
  This is how today's article describes Secretary Veneman's public 
position last August:

       She and her top deputies said ground beef imports would 
     resume only after the agency completed a formal rulemaking 
     process, with public debate.

  There was no public debate. Instead, there were undisclosed permits 
allowing banned Canadian beef in the United States.
  Not only am I extremely concerned that the Department of Agriculture 
deceived American consumers by allowing the import of Canadian beef 
that was previously banned, but I am also disappointed that the Bush 
administration is actually working to prevent American consumers from 
knowing where the food they buy comes from.
  That is why I am introducing a bill today that will require USDA to 
implement country-of-origin labeling on schedule this September. That 
was the date agreed upon in the Farm Bill which the President signed 
into law in 2002.
   Unfortunately, at the urging of the Bush administration and the 
large meatpackers--most likely the same people who urged USDA to issue 
permits to allow the importation of banned Canadian meat products--
Republican leaders in Congress inserted language into last year's 
omnibus appropriations bill in the dead of night delaying 
implementation of country-of-origin labeling for 2 years until 
September 2006.
   The bill I am introducing today is what the Senate has voted to do 
several times: Inform consumers about the origin of their food.
   Over 80 percent of American consumers have said they want to know 
the country of origin of their food, and over 170 groups representing 
over 50 million Americans support mandatory food labeling.
   We must not allow anyone who may represent special interests, anyone 
who now abrogates the spirit as well as the letter of the law to choose 
big business interests over the interests of the average American 
family. We must ensure consumer confidence, particularly now in light 
of recent developments. We would have not had the situation of 33

[[Page 10516]]

million pounds of banned beef entering the United States if it couldn't 
have been properly labeled.
   This legislation is long overdue. It is time that it become the law 
of the land.
   Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
   There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2451

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. COUNTRY OF ORIGIN LABELING.

       Section 285 of the Agricultural Marketing Act of 1946 (7 
     U.S.C. 1638d) is amended by striking ``2006'' and all that 
     follows through ``2004'' and inserting ``2004''.
                                 ______
                                 
      By Mr. FEINGOLD:
  S. 2452. A bill to require labeling of raw agricultural of ginseng, 
including the country of harvest, and for other purposes; to the 
Committee on Agriculture, Nutrition, and Forestry.
  Mr. FEINGOLD. Mr. President, I would like to discuss legislation I am 
introducing that would protect ginseng farmers and consumers by 
ensuring that ginseng sold at retail discloses where the root was 
harvested. The ``Ginseng Harvest Labeling Act of 2004'' is similar to a 
bill that I introduced in the last Congress, but it has been further 
strengthened based on suggestions I received from ginseng growers and 
the Ginseng Board of Wisconsin.
  I would like to take the opportunity to discuss American ginseng and 
the problems facing Wisconsin's ginseng growers so that my colleagues 
recognize the need for this legislation. Chinese and Native American 
cultures have used ginseng for thousands of years for herbal and 
medicinal purposes. As a dietary supplement, American ginseng is widely 
touted for its ability to improve energy and vitality, particularly in 
fighting fatigue or stress.
  In the U.S., ginseng is experiencing increasing popularity as a 
dietary supplement, and I am proud to say that my home State of 
Wisconsin is playing a central role in ginseng's resurgence. Wisconsin 
produces 97 percent of the ginseng grown in the United States, and 85 
percent of the country's ginseng is grown in just one Wisconsin county, 
Marathon County. Ginseng is also grown in a number of other States such 
as Maine, Maryland, New York, North Carolina, Oregon, South Carolina, 
and West Virginia.
  For Wisconsin, ginseng has been an economic boon. Wisconsin ginseng 
commands a premium price in world markets because it is of the highest 
quality and because it has a low pesticide and chemical content. In 
2002, U.S. exports of ginseng totaled nearly $45 million, much of which 
was grown in Wisconsin. With a huge market for this high-quality 
ginseng overseas, and growing popularity for the ancient root here at 
home, Wisconsin's ginseng industry should have a prosperous future 
ahead.
  Unfortunately, the outlook for ginseng farmers is marred by a serious 
problem--smuggled and mislabeled ginseng. Wisconsin ginseng is 
considered so superior to ginseng grown abroad that smugglers will go 
to great lengths to label ginseng grown in Canada or Asia as 
``Wisconsin-grown.''
  Here's how the switch takes place: Wisconsin ginseng is shipped to 
China to be sorted into various grades. While the sorting process is 
itself a legitimate part of distributing ginseng, smugglers often use 
it as a ruse to switch Wisconsin ginseng with Asian- or Canadian-grown 
ginseng considered inferior by consumers. The lower quality ginseng is 
then shipped back to the U.S. for sale to American consumers who think 
they are buying the Wisconsin-grown product.
  For consumers concerned with purchasing ginseng grown in the U.S., 
there is no accurate way of testing ginseng to determine where it was 
grown, other than testing for pesticides that are banned in the United 
States. The Ginseng Board of Wisconsin has been testing some ginseng 
found on store shelves, and in many of the products, residues of 
chemicals such as DDT, lead, arsenic, and quintozine (PCNB) have been 
detected. Since the majority of ginseng sold in the U.S. originates 
from countries with less stringent pesticide standards, it is vitally 
important that consumers know which ginseng is really grown in the U.S.
  To capitalize on their product's preeminence, the Ginseng Board of 
Wisconsin has developed a voluntary labeling program, stating that the 
ginseng is ``Grown in Wisconsin, U.S.A.'' However, Wisconsin ginseng is 
so valuable that counterfeit labels and ginseng smuggling have become 
widespread around the world. As a result, consumers have no way of 
knowing the most basic information about the ginseng they purchase--
where it was grown, what quality or grade it is, or whether it contains 
dangerous pesticides.
  My legislation, the Ginseng Harvest Labeling Act of 2004, proposes 
some common sense steps to address some of the challenges facing the 
ginseng industry. My legislation requires that ginseng, as a raw 
agricultural commodity, be sold at retail with a label clearly 
indicating the country that the ginseng was harvested in. `Harvest' is 
important because some Canadian and Chinese growers have ginseng plants 
that originated in the U.S., but because these plants were cultivated 
in the foreign country, they may have been treated with chemicals not 
allowed for use in the U.S. This label would also allow buyers of 
ginseng to more easily prevent foreign companies from mixing foreign-
produced ginseng with ginseng harvested in the U.S. The country of 
harvest labeling is a simple but effective way to enable consumers to 
make an informed decision.
  We must give ginseng growers the support they deserve by implementing 
these commonsense reforms that also help consumers make informed 
choices about the ginseng that they consume. We must ensure that when 
ginseng consumers reach for a high-quality ginseng product--such as 
Wisconsin-grown ginseng--they are getting the real thing, not a knock-
off.
  I ask unanimous consent that the full text of my bill, the Ginseng 
Harvest Labeling Act of 2004, be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2452

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Ginseng Harvest Labeling Act 
     of 2004''.

     SEC. 2. DISCLOSURE OF COUNTRY OF HARVEST.

       The Agricultural Marketing Act of 1946 (7 U.S.C. 1621 et 
     seq.) is amended by adding at the end the following:

                         ``Subtitle E--Ginseng

     ``SEC. 291. DISCLOSURE OF COUNTRY OF HARVEST.

       ``(a) Definition of Ginseng.--In this section, the term 
     `ginseng' means an herb or herbal ingredient that--
       ``(1) is derived from a plant classified within the genus 
     Panax; and
       ``(2) is offered for sale as a raw agricultural commodity 
     in any form intended to be used in or as a food or dietary 
     supplement under the name of `ginseng'.
       ``(b) Disclosure.--
       ``(1) In general.--A person that offers ginseng for sale as 
     a raw agricultural commodity shall disclose to potential 
     purchasers the country of harvest of the ginseng.
       ``(2) Importation.--A person that imports ginseng into the 
     United States shall disclose the country of harvest of the 
     ginseng at the point of entry of the United States, in 
     accordance with section 304 of the Tariff Act of 1930 (19 
     U.S.C. 1304).
       ``(c) Manner of Disclosure.--
       ``(1) In general.--The disclosure required by subsection 
     (b) shall be provided to potential purchasers by means of a 
     label, stamp, mark, placard, or other clear and visible sign 
     on the ginseng or on the package, display, holding unit, or 
     bin containing the ginseng.
       ``(2) Retailers.--A retailer of ginseng shall--
       ``(A) retain disclosure provided under subsection (b); and
       ``(B) provide disclosure to a retail purchaser of the raw 
     agricultural commodity.
       ``(3) Regulations.--The Secretary of Agriculture shall by 
     regulation prescribe with specificity the manner in which 
     disclosure shall be made in transactions at wholesale or 
     retail (including transactions by mail, telephone, or 
     Internet or in retail stores).
       ``(d) Failure to Disclose.--The Secretary of Agriculture 
     may impose on a person that fails to comply with subsection 
     (b) a civil penalty of not more than--

[[Page 10517]]

       ``(1) $1,000 for the first day on which the failure to 
     disclose occurs; and
       ``(2) $250 for each day on which the failure to disclose 
     continues.''.

     SEC. 3. EFFECTIVE DATE.

       This Act and the amendment made by this Act take effect on 
     the date that is 180 days after the date of enactment of this 
     Act.
                                 ______
                                 
      By Mr. DeWINE (for himself and Mr. Durbin):
  S. 2454. A bill to amend the Peace Corps Act to establish an 
Ombudsman of the Peace Corps and an Office of Safety and Security of 
the Peace Corps, to establish an independent Inspector General of the 
Peace Corps, and for other purposes; to the Committee on Foreign 
Relations.
  Mr. DeWINE. Mr. President, I ask unanimous consent that the Peace 
Corps Volunteers Health, Safety, and Security Act of 2004 be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record.

                                S. 2454

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Peace Corps Volunteers 
     Health, Safety, and Security Act of 2004''.

     SEC. 2. OMBUDSMAN OF THE PEACE CORPS.

       The Peace Corps Act (22 U.S.C. 2501 et seq.) is amended by 
     inserting after section 4 the following new section:

     ``SEC. 4A. OMBUDSMAN OF THE PEACE CORPS.

       ``(a) Establishment.--There is established in the Peace 
     Corps the Office of the Ombudsman of the Peace Corps (in this 
     section referred to as the `Office'). The Office shall be 
     headed by the Ombudsman of the Peace Corps (in this section 
     referred to as the `Ombudsman'), who shall be appointed by 
     and report directly to the Director of the Peace Corps.
       ``(b) Volunteer Complaints and Other Matters.--The 
     Ombudsman shall receive and, as appropriate, inquire into 
     complaints, questions, or concerns submitted by current or 
     former volunteers regarding services or support provided by 
     the Peace Corps to its volunteers, including matters 
     pertaining to--
       ``(1) the safety and security of volunteers;
       ``(2) due process, including processes relating to 
     separation from the Peace Corps;
       ``(3) benefits and assistance that may be due to current or 
     former volunteers;
       ``(4) medical or other health-related assistance; and
       ``(5) access to files and records of current or former 
     volunteers.
       ``(c) Employee Complaints and Other Matters.--The Ombudsman 
     shall receive and, as appropriate, inquire into complaints, 
     questions, or concerns submitted by current or former 
     employees of the Peace Corps on any matters of grievance.
       ``(d) Additional Duties.--The Ombudsman shall--
       ``(1) recommend responses to individual matters received 
     under subsections (b) and (c);
       ``(2) make recommendations for legislative, administrative, 
     or regulatory adjustments to address recurring problems or 
     other difficulties of the Peace Corps;
       ``(3) identify systemic issues relating to the practices, 
     policies, and administrative procedures of the Peace Corps 
     that affect volunteers and employees; and
       ``(4) call attention to problems not yet adequately 
     considered by the Peace Corps.
       ``(e) Standards of Operation.--The Ombudsman shall carry 
     out the duties under this section in a manner that is--
       ``(1) independent, impartial in the conduct of inquiries, 
     and confidential; and
       ``(2) consistent with the revised Standards for the 
     Establishment and Operation of Ombudsman Offices (August 
     2003) as endorsed by the American Bar Association.
       ``(f) Involvement in Matters Subject to Ongoing 
     Adjudication, Litigation, or Investigation.--The Ombudsman 
     shall refrain from any involvement in the merits of 
     individual matters that are the subject of ongoing 
     adjudication or litigation, or investigations related to such 
     adjudication or litigation.
       ``(g) Reports.--
       ``(1) In general.--Not later than 180 days after the date 
     of the enactment of this section, and semiannually 
     thereafter, the Ombudsman shall submit to the Director of the 
     Peace Corps, the Chair of the Peace Corps National Advisory 
     Council, and Congress a report containing a summary of--
       ``(A) the complaints, questions, and concerns considered by 
     the Ombudsman;
       ``(B) the inquiries completed by the Ombudsman;
       ``(C) recommendations for action with respect to such 
     complaints, questions, concerns, or inquiries; and
       ``(D) any other matters that the Ombudsman considers 
     relevant.
       ``(2) Confidentiality.--Each report submitted under 
     paragraph (1) shall maintain confidentiality on any matter 
     that the Ombudsman considers appropriate in accordance with 
     subsection (e).
       ``(h) Employee Defined.--In this section, the term 
     `employee' means an employee of the Peace Corps, an employee 
     of the Office of Inspector General of the Peace Corps, an 
     individual appointed or assigned under the Foreign Service 
     Act of 1980 (22 U.S.C. 3901 et seq.) to carry out functions 
     under this Act, or an individual subject to a personal 
     services contract with the Peace Corps.''.

     SEC. 3. OFFICE OF SAFETY AND SECURITY OF THE PEACE CORPS.

       The Peace Corps Act (22 U.S.C. 2501 et seq.), as amended by 
     section 2 of this Act, is further amended by inserting after 
     section 4A the following new section:

     ``SEC. 4B. OFFICE OF SAFETY AND SECURITY OF THE PEACE CORPS.

       ``(a) Establishment.--There is established in the Peace 
     Corps the Office of Safety and Security of the Peace Corps 
     (in this section referred to as the `Office'). The Office 
     shall be headed by the Associate Director of the Peace Corps 
     for Safety and Security, who shall be appointed by and report 
     directly to the Director of the Peace Corps.
       ``(b) Responsibilities.--The Office established under 
     subsection (a) shall be responsible for all safety and 
     security activities of the Peace Corps, including background 
     checks of volunteers and staff, the safety and security of 
     volunteers and staff (including training), the safety and 
     security of facilities, the security of information 
     technology, and other responsibilities as required by the 
     Director.
       ``(c) Sense of Congress.--It is the sense of Congress 
     that--
       ``(1) the Associate Director of Safety and Security of the 
     Peace Corps, as appointed pursuant to subsection (a) of this 
     section, should assign a Peace Corps country security 
     coordinator for each country where the Peace Corps has a 
     program of volunteer service for the purposes of carrying out 
     the field responsibilities of the Office; and
       ``(2) each country security coordinator--
       ``(A) should be a United States citizen;
       ``(B) should be under the supervision of the Peace Corps 
     country director in such country;
       ``(C) should report directly to the Associate Director of 
     the Peace Corps for Safety and Security on all matters of 
     importance that the country security coordinator considers 
     necessary;
       ``(D) should be responsible for coordinating security 
     activities with the regional security officer of the Peace 
     Corps responsible for the country to which such country 
     security officer is assigned; and
       ``(E) should have access to information, including 
     classified information, relating to possible threats against 
     Peace Corps volunteers.''.

     SEC. 4. INSPECTOR GENERAL OF THE PEACE CORPS.

       (a) Establishment of Independent Inspector General.--
       (1) In general.--The Inspector General Act of 1978 (5 
     U.S.C. App.) is amended--
       (A) in section 8G(a)(2), by striking ``, the Peace Corps'';
       (B) in section 9(a)(1), by adding at the end the following 
     new subparagraph:
       ``(X) of the Peace Corps, the office of that agency 
     referred to as the `Office of Inspector General'; and''; and
       (C) in section 11--
       (i) in paragraph (1), by striking ``or the Office of 
     Personnel Management'' and inserting ``the Office of 
     Personnel Management, or the Peace Corps''; and
       (ii) in paragraph (2), by inserting ``, the Peace Corps'' 
     after ``the Office of Personnel Management''.
       (2) Technical amendment.--Section 9(a)(1)(U) of the 
     Inspector General Act of 1978 (5 U.S.C. App.) is amended by 
     striking ``and'' at the end.
       (b) Temporary Appointment.--The Director of the Peace Corps 
     may appoint an individual to assume the powers and duties of 
     the Inspector General of the Peace Corps under the Inspector 
     General Act of 1978 (5 U.S.C. App.) on an interim basis until 
     such time as a person is appointed by the President, by and 
     with the advice and consent of the Senate, pursuant to the 
     amendments made in this section.
       (c) Exemption From Employment Term Limits Under the Peace 
     Corps Act.--
       (1) In general.--Section 7 of the Peace Corps Act (22 
     U.S.C. 2506) is amended--
       (A) by redesignating subsection (c) as subsection (b); and
       (B) by adding at the end the following new subsection:
       ``(c) The provisions of this section that limit the 
     duration of service, appointment, or assignment of 
     individuals shall not apply to--
       ``(1) the Inspector General of the Peace Corps;
       ``(2) officers of the Office of the Inspector General of 
     the Peace Corps;
       ``(3) any individual whose official duties primarily 
     include the safety and security of Peace Corps volunteers or 
     employees;
       ``(4) the head of the office responsible for medical 
     services of the Peace Corps; or
       ``(5) any health care professional within the office 
     responsible for medical services of the Peace Corps.''.
       (2) Conforming amendment.--The first proviso of section 
     15(d)(4) of the Peace Corps Act

[[Page 10518]]

     (22 U.S.C. 2514(d)(4)) is amended by striking ``7(c)'' and 
     inserting ``7(b)''.
       (d) Compensation.--Section 7 of the Peace Corps Act (22 
     U.S.C. 2506), as amended by subsection (c) of this section, 
     is further amended by adding at the end the following new 
     subsection:
       ``(d) The Inspector General of the Peace Corps shall be 
     compensated at the rate provided for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code.''.

     SEC. 5. OFFICE OF MEDICAL SERVICES OF THE PEACE CORPS.

       (a) Report on Medical Screening and Placement 
     Coordination.--Not later than 120 days after the date of the 
     enactment of this Act, the Director of the Peace Corps shall 
     submit to the appropriate congressional committees a report 
     that--
       (1) describes the medical screening procedures and 
     guidelines used by the office responsible for medical 
     services of the Peace Corps to determine whether an applicant 
     for Peace Corps service has worldwide clearance, limited 
     clearance, a deferral period, or is not medically, including 
     psychologically, qualified to serve in the Peace Corps as a 
     volunteer;
       (2) describes the procedures and guidelines used by the 
     Peace Corps to ensure that applicants for Peace Corps service 
     are matched with a host country where the applicant can, with 
     reasonable accommodations, complete at least two years of 
     volunteer service without interruption due to foreseeable 
     medical conditions; and
       (3) with respect to each of fiscal years 2000 through 2003 
     and the first six months of fiscal year 2004, states the 
     number of--
       (A) medical screenings of applicants conducted;
       (B) applicants who have received worldwide clearance, 
     limited clearance, deferral periods, and medical 
     disqualifications to serve;
       (C) appeals to the Medical Screening Review Board of the 
     Peace Corps and the number of times that an initial screening 
     decision was upheld;
       (D) requests that have been made to the head of the office 
     responsible for medical services of the Peace Corps for 
     reconsideration of a decision of the Medical Screening Review 
     Board and the number of times that such decisions were upheld 
     by the head of such office;
       (E) Peace Corps volunteers who became medically qualified 
     to serve because of a decision of the Medical Screening 
     Review Board and who were later evacuated or terminated their 
     service early due to medical reasons;
       (F) Peace Corps volunteers who became medically qualified 
     to serve because of a decision of the head of the office 
     responsible for medical services of the Peace Corps and who 
     were later evacuated or terminated their service early due to 
     medical reasons;
       (G) Peace Corps volunteers who the agency has had to 
     separate from service due to the discovery of undisclosed 
     medical information; and
       (H) Peace Corps volunteers who have terminated their 
     service early due to medical, including psychological, 
     reasons.
       (b) Full Time Director of Medical Services.--Section 4(c) 
     of the Peace Corps Act (22 U.S.C. 2503(c)) is amended by 
     adding at the end the following new paragraph:
       ``(5) The Director of the Peace Corps shall ensure that the 
     head of the office responsible for medical services of the 
     Peace Corps does not occupy any other position in the Peace 
     Corps.''.

     SEC. 6. REPORTS ON THE ``FIVE YEAR RULE'' AND ON WORK 
                   ASSIGNMENTS OF VOLUNTEERS OF THE PEACE CORPS.

       (a) Report by the Comptroller General.--
       (1) In general.--Not later than one year after the date of 
     enactment of this Act, the Comptroller General shall submit 
     to the appropriate congressional committees a report on the 
     effects on the ability of the Peace Corps to effectively 
     manage Peace Corps operations of the limitations on the 
     duration of employment, appointment, or assignment of 
     officers and employees of the Peace Corps under section 7 of 
     the Peace Corps Act (22 U.S.C. 2506).
       (2) Contents.--The report described in paragraph (1) shall 
     include--
       (A) a description of such limitations;
       (B) a description of the history of such limitations and 
     the purposes for which it was enacted and amended;
       (C) an analysis of the impact of such limitations on the 
     ability of the Peace Corps to recruit capable volunteers, 
     establish productive and worthwhile assignments for 
     volunteers, provide for the health, safety, and security of 
     volunteers, and, as declared in section 2(a) of the Peace 
     Corps Act (22 U.S.C. 2501(a)), ``promote a better 
     understanding of the American people on the part of the 
     peoples served and a better understanding of other peoples on 
     the part of the American people'';
       (D) an assessment of whether the application of such 
     limitations have accomplished the objectives for which they 
     were intended; and
       (E) recommendations, if any, for legislation to amend 
     provisions of the Peace Corps Act that relate to such 
     limitations.
       (b) Report on Work Assignments of Volunteers.--
       (1) In general.--Not later than 180 days after the date of 
     the enactment of this Act, the Director of the Peace Corps 
     shall submit to the appropriate congressional committees a 
     report on the extent to which the work assignments of Peace 
     Corps volunteers fulfill the commitment of the Peace Corps to 
     ensuring that--
       (A) such assignments are well developed, with clear roles 
     and expectations; and
       (B) volunteers are well-suited for their assignments.
       (2) Contents.--The report described in paragraph (1) shall 
     include--
       (A) an assessment of the extent to which agreements between 
     the Peace Corps and host countries delineate clear roles for 
     volunteers in assisting host governments to advance their 
     national development strategies;
       (B) an assessment of the extent to which the Peace Corps--
       (i) recruits volunteers who have skills that correlate with 
     the expectations cited in the country agreements; and
       (ii) assigns such volunteers to such posts;
       (C) a description of the procedures in place for 
     determining volunteer work assignments and minimum standards 
     for such assignments;
       (D) the results of a survey of volunteers on health, 
     safety, and security issues and of satisfaction surveys, 
     which are to be conducted after the date of the enactment of 
     this Act; and
       (E) an assessment of the plan of the Peace Corps to 
     increase the number of volunteers who are assigned to 
     projects in sub-Saharan Africa, Asia, and the Western 
     Hemisphere, particularly among communities of African descent 
     within countries in the Western Hemisphere, that help combat 
     HIV/AIDS and other global infectious diseases.

     SEC. 7. DEFINITION OF APPROPRIATE CONGRESSIONAL COMMITTEES.

       In this Act, the term ``appropriate congressional 
     committees'' means the Committee on Foreign Relations of the 
     Senate and the Committee on International Relations of the 
     House of Representatives.
                                 ______
                                 
      By Mrs. HUTCHISON:
  S. 2455. A bill to amend title II of the Social security Act to 
repeal the windfall elimination provision and protect the retirement of 
public servants; to the Committee on Finance.
  Mrs. HUTCHISON. Mr. President, I ask unanimous consent that the text 
of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2455

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Public Servant Retirement 
     Protection Act''.

     SEC. 2. REPEAL OF CURRENT WINDFALL ELIMINATION PROVISION.

       Paragraph (7) of section 215(a) of the Social Security Act 
     (42 U.S.C. 415(a)(7)) is repealed.

     SEC. 3. REPLACEMENT OF THE WINDFALL ELIMINATION PROVISION 
                   WITH A FORMULA EQUALIZING BENEFITS FOR CERTAIN 
                   INDIVIDUALS WITH NON-COVERED EMPLOYMENT.

       (a) Substitution of Proportional Formula for Formula Based 
     on Covered Portion of Periodic Benefit.--
       (1) In general.--Section 215(a) of the Social Security Act 
     (as amended by section 2 of this Act) is amended further by 
     inserting after paragraph (6) the following new paragraph:
       ``(7)(A) In the case of an individual whose primary 
     insurance amount would be computed under paragraph (1) of 
     this subsection, who--
       ``(i) attains age 62 after 1985 (except where he or she 
     became entitled to a disability insurance benefit before 1986 
     and remained so entitled in any of the 12 months immediately 
     preceding his or her attainment of age 62), or
       ``(ii) would attain age 62 after 1985 and becomes eligible 
     for a disability insurance benefit after 1985,
      and who first becomes eligible after 1985 for a monthly 
     periodic payment (including a payment determined under 
     subparagraph (E), but excluding (I) a payment under the 
     Railroad Retirement Act of 1974 or 1937, (II) a payment by a 
     social security system of a foreign country based on an 
     agreement concluded between the United States and such 
     foreign country pursuant to section 233, and (III) a payment 
     based wholly on service as a member of a uniformed service 
     (as defined in section 210(m)) which is based in whole or in 
     part upon his or her earnings for service which did not 
     constitute `employment' as defined in section 210 for 
     purposes of this title (hereafter in this paragraph and in 
     subsection (d)(3) referred to as `noncovered service'), the 
     primary insurance amount of that individual during his or her 
     concurrent entitlement to such monthly periodic payment and 
     to old-age or disability insurance benefits shall be computed 
     or recomputed under subparagraph (B) or subparagraph (D) (as 
     applicable).
       ``(B) In the case of an individual who first performs 
     service described in subparagraph (A) after the 12th calendar 
     month following

[[Page 10519]]

     the date of the enactment of the Public Servant Retirement 
     Protection Act, if paragraph (1) of this subsection would 
     apply to such individual (except for subparagraph (A) of this 
     paragraph), the individual's primary insurance amount shall 
     be the product derived by multiplying--
       ``(i) the individual's primary insurance amount, as 
     determined under paragraph (1) of this subsection and 
     subparagraph (C)(i) of this paragraph, by
       ``(ii) a fraction--
       ``(I) the numerator of which is the individual's average 
     indexed monthly earnings (determined without regard to 
     subparagraph (C)(i)), and
       ``(II) the denominator of which is an amount equal to the 
     individual's average indexed monthly earnings (as determined 
     under subparagraph (C)(i)),
     rounded, if not a multiple of $0.10, to the next lower 
     multiple of $0.10.
       ``(C)(i) For purposes of determining an individual's 
     primary insurance amount pursuant to subparagraph (B)(i), the 
     individual's average indexed monthly earnings shall be 
     determined by treating all service performed after 1950 on 
     which the individual's monthly periodic payment referred to 
     in subparagraph (A) is based (other than noncovered service 
     as a member of a uniformed service (as defined in section 
     210(m))) as `employment' as defined in section 210 for 
     purposes of this title (together with all other service 
     performed by such individual consisting of `employment' as so 
     defined).
       ``(ii) For purposes of determining average indexed monthly 
     earnings as described in clause (i), the Commissioner of 
     Social Security shall provide by regulation for a method for 
     determining the amount of wages derived from service 
     performed after 1950 on which the individual's periodic 
     benefit is based and which is to be treated as `employment' 
     solely for purposes of clause (i). Such method shall provide 
     for reliance on employment records which are provided to the 
     Commissioner and which constitute a reasonable basis for 
     treatment of service as `employment' for such purposes, 
     together with such other information received by the 
     Commissioner as the Commissioner may consider appropriate as 
     a reasonable basis for treatment of service as `employment' 
     for such purposes.
       ``(D)(i) In the case of an individual who has performed 
     service described in subparagraph (A) during or before the 
     12th calendar month following the date of the enactment of 
     the Public Servant Retirement Protection Act, if paragraph 
     (1) of this subsection would apply to such individual (except 
     for subparagraph (A) of this paragraph), there shall first be 
     computed an amount equal to the individual's primary 
     insurance amount under paragraph (1) of this subsection, 
     except that for purposes of such computation the percentage 
     of the individual's average indexed monthly earnings 
     established by subparagraph (A)(i) of paragraph (1) shall be 
     the percent specified in clause (ii). There shall then be 
     computed (without regard to this paragraph) a second amount, 
     which shall be equal to the individual's primary insurance 
     amount under paragraph (1) of this subsection, except that 
     such second amount shall be reduced by an amount equal to 
     one-half of the portion of the monthly periodic payment which 
     is attributable to noncovered service performed after 1956 
     (with such attribution being based on the proportionate 
     number of years of such noncovered service) and to which the 
     individual is entitled (or is deemed to be entitled) for the 
     initial month of his or her concurrent entitlement to such 
     monthly periodic payment and old-age or disability insurance 
     benefits. There shall then be computed (without regard to 
     this paragraph) a third amount, which shall be equal to the 
     individual's primary insurance amount determined under 
     subparagraph (B) as if subparagraph (B) applied in the case 
     of such individual. The individual's primary insurance amount 
     shall be the largest of the three amounts computed under this 
     subparagraph (before the application of subsection (i)).
       ``(ii) For purposes of clause (i), the percent specified in 
     this clause is--
       ``(I) 80.0 percent with respect to individuals who become 
     eligible (as defined in paragraph (3)(B)) for old-age 
     insurance benefits (or became eligible as so defined for 
     disability insurance benefits before attaining age 62) in 
     1986;
       ``(II) 70.0 percent with respect to individuals who so 
     become eligible in 1987;
       ``(III) 60.0 percent with respect to individuals who so 
     become eligible in 1988;
       ``(IV) 50.0 percent with respect to individuals who so 
     become eligible in 1989; and
       ``(V) 40.0 percent with respect to individuals who so 
     become eligible in 1990 or thereafter.
       ``(E)(i) Any periodic payment which otherwise meets the 
     requirements of subparagraph (A), but which is paid on other 
     than a monthly basis, shall be allocated on a basis 
     equivalent to a monthly payment (as determined by the 
     Commissioner of Social Security), and such equivalent monthly 
     payment shall constitute a monthly periodic payment for 
     purposes of this paragraph.
       ``(ii) In the case of an individual who has elected to 
     receive a periodic payment that has been reduced so as to 
     provide a survivor's benefit to any other individual, the 
     payment shall be deemed to be increased (for purposes of any 
     computation under this paragraph or subsection (d)(3) by the 
     amount of such reduction.
       ``(iii) For purposes of this paragraph, the term `periodic 
     payment' includes a payment payable in a lump sum if it is a 
     commutation of, or a substitute for, periodic payments.
       ``(F)(i) Subparagraph (D) shall not apply in the case of an 
     individual who has 30 years or more of coverage. In the case 
     of an individual who has more than 20 years of coverage but 
     less than 30 years of coverage (as so defined), the percent 
     specified in the applicable subdivision of subparagraph 
     (D)(ii) shall (if such percent is smaller than the applicable 
     percent specified in the following table) be deemed to be the 
     applicable percent specified in the following table:
``If the number of such individual's years of coverage (as so defined) 
  is:                                        The applicable percent is:
29...........................................................85 percent
28...........................................................80 percent
27...........................................................75 percent
26...........................................................70 percent
25...........................................................65 percent
24...........................................................60 percent
23...........................................................55 percent
22...........................................................50 percent
21...........................................................45 percent

       ``(ii) For purposes of clause (i), the term `year of 
     coverage' shall have the meaning provided in paragraph 
     (1)(C)(ii), except that the reference to `15 percent' therein 
     shall be deemed to be a reference to `25 percent'.
       ``(G) An individual's primary insurance amount determined 
     under this paragraph shall be deemed to be computed under 
     paragraph (1) of this subsection for the purpose of applying 
     other provisions of this title.
       ``(H) This paragraph shall not apply in the case of an 
     individual whose eligibility for old-age or disability 
     insurance benefits is based on an agreement concluded 
     pursuant to section 233 or an individual who on January 1, 
     1984--
       ``(i) is an employee performing service to which social 
     security coverage is extended on that date solely by reason 
     of the amendments made by section 101 of the Social Security 
     Amendments of 1983; or
       ``(ii) is an employee of a nonprofit organization which (on 
     December 31, 1983) did not have in effect a waiver 
     certificate under section 3121(k) of the Internal Revenue 
     Code of 1954 and to the employees of which social security 
     coverage is extended on that date solely by reason of the 
     amendments made by section 102 of that Act, unless social 
     security coverage had previously extended to service 
     performed by such individual as an employee of that 
     organization under a waiver certificate which was 
     subsequently (prior to December 31, 1983) terminated.''.
       (2) Conforming amendments.----
       (A) Section 215(d)(3) of such Act (42 U.S.C. 415(d)(3)) is 
     amended--
       (i) by striking ``subsection (a)(7)(C)'' each place it 
     appears and inserting ``subsection (a)(7)(E)'';
       (ii) by striking ``subparagraph (E)'' and inserting 
     ``subparagraph (H)''; and
       (iii) by striking ``subparagraph (D)'' and inserting 
     ``subparagraph (F)(i)''.
       (B) Section 215(f)(9)(A) of such Act (42 U.S.C. 
     415(f)(9)(A)) is amended by striking ``(a)(7)(C)'' and 
     inserting ``(a)(7)(E)''.

     SEC. 4. EFFECTIVE DATE.

       The amendments made by this Act shall apply with respect to 
     monthly insurance benefits for months commencing with or 
     after the 12th calendar month following the date of the 
     enactment of this Act. Notwithstanding section 215(f) of the 
     Social Security Act, the Commissioner of Social Security 
     shall recompute primary insurance amounts to the extent 
     necessary to carry out the amendments made by this Act.
                                 ______
                                 
      By Mr. REID (for himself and Mr. Ensign):
  S. 2458. A bill to provide for the conveyance of certain public lands 
in and around historic mining townsites in Nevada, and for other 
purposes; to the Committee on Energy and Natural Resources.
  Mr. REID. Mr. President, I rise today on behalf of myself and Senator 
Ensign to introduce the Nevada Mining Townsite Conveyance Act, which 
will address an important public land issue in rural Nevada. As you may 
know, the Federal Government controls over 87 percent of the State of 
Nevada. That's more than 61 million acres of land. This fact makes it 
necessary for our State and our communities to pursue Federal remedies 
for problems that in other States can be handled in a much more 
expeditious manner. With this in mind, Senator Ensign and I look 
forward to working with our colleagues to pass this common-sense 
legislation in a bipartisan and timely fashion.
  Two rural counties in Nevada have asked for our help in settling 
longstanding trespass issues that hurt 2 historic mining communities. 
The towns of Ione and Gold Point have been continuously occupied for 
over 100 years. Many residents live on land that

[[Page 10520]]

their families have ostensibly owned for many decades. These citizens 
have paid their property taxes and made improvements to their 
properties, rehabilitated historic structures and built new ones.
  The documents by which many of these people claim possession of the 
properties date back many years. In fact, some of the deeds are 
historic documents themselves. Yet because many of these documents do 
not satisfy modern requirements for demonstrating land title, they have 
been deemed invalid. In other words, the Bureau of Land Management has 
determined that some of the residents of Ione and Gold Point are 
trespassing on Federal land. This unfortunate situation puts the BLM at 
odds with the local residents and county governments.
  Nye County, Esmeralda County, and the BLM have worked together for 
almost 10 years to come up with a solution to this problem. All of 
these parties support the legislation that we offer today as a solution 
to these land ownerships conflicts, and as a means of promoting 
responsible resource management. All of the land included in our bill 
has been identified by the BLM for disposal.
  Our legislation represents the first of a two-part solution. Under 
this bill, specified lands within the historic mining townsites of Ione 
and Gold Point would be conveyed to the respective counties. Under the 
provisions of a State law passed several years ago in Nevada, the 
counties will then re-convey the land to these people or entities who 
can demonstrate ownership or longstanding occupancy of specific land 
parcels.
  The sum of our bill is that it conveys for no consideration 
approximately 760 acres in Ione and Gold Point to the counties of Nye 
and Esmeralda. As a condition of the conveyance, all historic and 
cultural resources contained in the townsites shall be preserved and 
protected under applicable Federal and State law. These conveyances 
will benefit the agencies that manage Nevada's vast Federal lands as 
well as the proud citizens of our rural communities. We sincerely hope 
that our colleagues will support this legislation. It is a practical 
solution that deserves swift passage. We salute the Bureau of Land 
Management, the counties, and the local residents for their cooperation 
and hard work in crafting this excellent compromise.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

        This Act may be cited as the ``Nevada Mining Townsite 
     Conveyance Act''.

     SEC. 2. DISPOSAL OF PUBLIC LANDS IN MINING TOWNSITES, 
                   ESMERALDA AND NYE COUNTIES, NEVADA.

       (a) Findings.--Congress finds the following:
       (1) The Federal Government owns real property in and around 
     historic mining townsites in the counties of Esmeralda and 
     Nye in the State of Nevada.
       (2) While the real property is under the jurisdiction of 
     the Secretary of the Interior, acting through the Bureau of 
     Land Management, some of the real property land has been 
     occupied for decades by persons who took possession by 
     purchase or other documented and putatively legal 
     transactions, but whose continued occupation of the real 
     property constitutes a ``trespass'' upon the title held by 
     the Federal Government.
       (3) As a result of the confused and conflicting ownership 
     claims, the real property is difficult to manage under 
     multiple use policies and creates a continuing source of 
     friction and unease between the Federal Government and local 
     residents.
       (4) All of the real property is appropriate for disposal 
     for the purpose of promoting administrative efficiency and 
     effectiveness, and the Bureau of Land Management has already 
     identified certain parcels of the real property for disposal.
       (5) Some of the real property contains historic and 
     cultural values that must be protected.
       (6) To promote responsible resource management of the real 
     property, certain parcels should be conveyed to the county in 
     which the property is situated in accordance with land use 
     management plans of the Bureau of Land Management so that the 
     county can, among other things, dispose of the property to 
     persons residing on or otherwise occupying the property.
       (b) Mining Townsite Defined.--In this section, the term 
     ``mining townsite'' means real property in the counties of 
     Esmeralda and Nye, Nevada, that is owned by the Federal 
     Government, but upon which improvements were constructed 
     because of a mining operation on or near the property and 
     based upon the belief that--
       (1) the property had been or would be acquired from the 
     Federal Government by the entity that operated the mine; or
       (2) the person who made the improvement had a valid claim 
     for acquiring the property from the Federal Government.
       (c) Conveyance Authority.--
       (1) In general.--Notwithstanding sections 202 and 203 of 
     the Federal Land Policy and Management Act of 1976 (43 U.S.C. 
     1712, 1713), the Secretary of the Interior, acting through 
     the Bureau of Land Management, shall convey, without 
     consideration, all right, title, and interest of the United 
     States in and to mining townsites (including improvements 
     thereon) identified for conveyance on the maps entitled 
     ``Original Mining Townsite Ione Land Disposal Map Nye 
     County'' and ``Original Mining Townsite Gold Point Land 
     Disposal Map Esmeralda County'' dated October 29, 2003.
       (2) Availability of maps.--The maps referred to in 
     paragraph (1) shall be on file and available for public 
     inspection in the appropriate offices of the Secretary of the 
     Interior, including the office of the Bureau of Land 
     Management located in the State of Nevada.
       (d) Recipients.--
       (1) Original recipient.--Subject to paragraph (2), the 
     conveyance of a mining townsite under subsection (c) shall be 
     made to the county in which the mining townsite is situated.
       (2) Reconveyance to occupants.--In the case of a mining 
     townsite conveyed under subsection (c) for which a valid 
     interest is proven by one or more persons, under the 
     provisions of Nevada Revised Statutes Chapter 244, the county 
     that received the mining townsite under paragraph (1) shall 
     reconvey the property to that person or persons by 
     appropriate deed or other legal conveyance as provided in 
     that State law. For purposes of proving a valid interest, the 
     person making the claim must have occupied the mining 
     townsite for at least 15 years immediately before the date of 
     the enactment of this Act. The county is not required to 
     recognize a claim under this paragraph submitted more than 10 
     years after the date of the enactment of this Act.
       (e) Protection of Historic and Cultural Resources.--As a 
     condition on the conveyance or reconveyance of a mining 
     townsite under subsection (c), all historic and cultural 
     resources (including improvements) on the mining townsite 
     shall be preserved and protected in accordance with 
     applicable Federal and State law.
       (f) Valid Existing Rights.--The conveyance of a mining 
     townsite under this section shall be subject to valid 
     existing rights, including any easement or other right-of-way 
     or lease in existence as of the date of the conveyance. All 
     valid existing rights and interests of mining claimants shall 
     be maintained, unless those rights or interests are deemed 
     abandoned and void or null and void under--
       (1) section 2320 of the Revised Statutes (30 U.S.C. 21 et 
     seq);
       (2) the Federal Land Policy and Management Act of 1976 (43 
     U.S.C. 1701 et seq); or
       (3) subtitle B of title X of the Omnibus Budget 
     Reconciliation Act of 1993 (30 U.S.C. 28(f)-(k)), including 
     regulations promulgated under section 3833.1 of title 43, 
     Code of Federal Regulations or any successor regulation.
       (g) Survey.--A mining townsite to be conveyed by the United 
     States under this section shall be sufficiently surveyed to 
     legally describe the land for patent conveyance.
       (h) Release.--On completion of the conveyance of a mining 
     townsite under subsection (c), the United States shall be 
     relieved from liability for, and shall be held harmless from, 
     any and all claims arising from the presence of improvements 
     and materials on the conveyed property.
       (i) Authorization of Appropriations.--There is authorized 
     to be appropriated to the Secretary of the Interior such 
     amounts as may be necessary to carry out the conveyances 
     required by this section, including funds to cover the costs 
     of cadastral and mineral surveys, mineral potential reports, 
     hazardous materials, biological, cultural and archaeological 
     clearances, validity examinations and other expenses 
     incidental to the conveyances.
                                 ______
                                 
      By Mr. ROCKEFELLER:
  S. 2459. A bill to authorize the Secretary of Homeland Security to 
award research and equipment grants, to provide a tax credit for 
employers who hire temporary workers to replace employees receiving 
first responder training, to provide school-based mental health 
training, and for other purposes; to the Committee on Finance.
  Mr. ROCKEFELLER. Mr. President, I am proud today to introduce the 
Community Security Act of 2004. This bill is intended to help prepare 
our Nation to cope with future disasters, as well as

[[Page 10521]]

help the daily work of our first responders, by adequately training and 
equipping them, and by increasing Federal investments in relevant 
research and development. While much of the bill applies generally to 
all first responders, this legislation gives special emphasis to the 
role of volunteer first responders.
  As my colleagues surely know, volunteers make up a very significant 
portion of our Nation's fire service, as well as emergency medical 
personnel and, to a somewhat lesser degree, law enforcement. The role 
of volunteers is especially prominent in rural areas, such as in my 
State of West Virginia. Making certain that local governments can 
recruit and retain first responders, and that once serving, these 
dedicated men and women have the necessary tools, are essential factors 
in protecting our communities.
  Inspiration for much of this bill came from the West Virginia Summit 
on Homeland Security, which I hosted in November of last year, and from 
the numerous roundtable discussions I have had with my State's first 
responders since the terrorist attacks on our country on September 11, 
2001. During the Summit and in the discussions that preceded it, first 
responders, educators, health officials, and local elected officials 
from around West Virginia provided me with thoughtful analysis of what 
works in Federal assistance programs, what doesn't, and what has been 
completely lacking.
  Although the President and Congress have made great strides in 
improving our homeland security, there are still gaping holes in our 
level of preparedness that must be filled. For the most part, the 
Federal Government is the only source of funding for this work; work 
that must be done. This legislation is based on what first responders 
have told me they need and is intended to address these needs.
  What was reiterated in meeting after meeting was that the gaps were 
many, and that additional State funding was unlikely. As almost every 
State in the Union faces budget shortfalls, I expect my colleagues have 
heard much the same thing. First responders and local politicians need 
to recruit and train volunteers; they need the Federal Government to 
help them supply these men and women with basic lifesaving and 
interoperable communication equipment; and they need help in fostering 
cooperation among not only the different professions within the first 
responder community, but between first responders and the education and 
social service communities.
  Many areas of concern were discussed and it became clear to me that 
no one program could address all of them. Instead of introducing a 
number of small bills, I've put together a package of legislation that 
contains several arguably unrelated provisions that have one thing in 
common--each is designed to improve homeland security at the local 
level.
  In West Virginia and across the Nation, the numbers of volunteer 
first responders have been dwindling due to a number of factors--
National Guard and Reserve call-ups and changing American lifestyles 
that leave little time for the serious commitment necessary to be a 
first responder. It is believed that many more people would volunteer, 
or would continue in their service as volunteers, if there were a way 
to carve out more time for the training involved. In addition to basic 
training, West Virginia and other states require additional training 
for first responders who choose to serve in units specializing in 
Weapons of Mass Destruction (WMD) response, or mitigation of biohazards 
and chemical releases. In fact, Secretary Ridge has cited West 
Virginia's homeland security plan, including development of highly 
trained Regional Response Teams, as an example for other States to 
follow.
  The problem is, earning the right to be part of one of these teams--
made up of the best of the best in their respective disciplines--
requires training that most volunteers, who are holding down full-time 
jobs in addition to their public service and family responsibilities, 
cannot find the time for, or in some cases, afford. For example, West 
Virginia's Regional Response Team members are required, within the 
first two years, to complete 200 hours of specialized training over and 
above what is already required in their roles as firefighters or EMTs. 
For many volunteer first responders, this time commitment is difficult 
to meet but, for those whose jurisdictions do not pay training costs, 
it is impossible to justify.
  To remedy this situation, this bill creates two tax incentives: a 
business credit to encourage small businesses to allow their volunteer 
first responder employees to take time off for training, and a personal 
deduction for the first responders themselves, when training and 
related expenses are not reimbursed by their State or local government.
  My conversations with West Virginia first responders and local 
officials have also taught me that even when a State is well prepared 
or, in the case of West Virginia, exceptionally prepared, gaps can 
still exist at the local level which put citizens at risk. Some local 
first responder units, especially those in rural areas, do not feel as 
prepared as they know they should be. For example, a recent report 
found that most fire departments across the country had only enough 
radios for one-half of the firefighters on a shift and breathing 
apparatuses for only one-third. Without these basics, these brave men 
and women are not adequately equipped to respond to a house fire and 
are at a serious disadvantage when responding to a critical incident.
  Similarly, some firehouses and police stations lack basic 
telecommunications equipment. I have been concerned for some time that 
many of our police departments in rural areas were operating without 
the crime-fighting tools at their disposal that computers and high-
speed Internet connections offer. So, while I was not necessarily 
surprised, I was a little troubled that the lack of modern 
telecommunications equipment--computer hardware, Internet service and 
e-mail, and multiple phone and fax lines--was hampering the ability of 
fire departments and EMS units to serve their communities. Given the 
wealth of information available and the greater amounts of first 
responder work conducted over the Internet, these basic office tools 
are essential to guarantee the safety and protection of our citizens. 
For instance, where this equipment is available, some first responder 
training is now being done over the Internet, saving departments time 
and money. Rural firehouses are probably the ones least likely to have 
an Internet-accessible computer and are also the least likely to be 
able to fund a longer trip to a fire school.
  So, this legislation requires the Secretary of Homeland Security to 
assess the critical needs of a first responder unit, from personal 
safety equipment to office machines, and establishes a grant program to 
provide the basic equipment essential for carrying out the constantly 
expanding responsibilities of local first responders. The Secretary is 
to give emphasis to those departments most in need. These departments 
will often, but not always, be rural departments.
  The other areas I cover in this bill are a bit of a departure from 
standard measures to increase funding and provide better equipment for 
first responders. They are, I believe, no less important to the goal of 
improving the safety and security of our towns and cities. Again, my 
conversations with people on the front lines--in this instance teachers 
and academic experts on homeland security and mental health--inspired 
these provisions.
  Our communities have had to adjust to some new realities. Our schools 
find themselves thrust into a role in disaster preparedness and 
response that most educators never before considered. When I asked 
school personnel what was needed to improve the circumstance of schools 
in homeland security preparation, response, and mitigation efforts, I 
was surprised to hear their answer--mental health professionals in the 
schools and training for school staff in mental health issues. This 
bill works to address these community needs in two ways. First, in the 
unfortunate event that a school is the scene of a disaster, or is 
called upon to assist a community in response to a disaster elsewhere, 
this bill provides

[[Page 10522]]

that community with a reimbursement mechanism for related expenses. 
Second, the bill creates a sustainable program to provide school-based 
mental health services to all students. I am convinced that having 
mental health professionals in schools to train students and faculty 
about disaster avoidance and preparation makes for safer, healthier 
schools and more stable communities.
  Our institutions of higher learning are already contributing to 
homeland security. The Department of Homeland Security has a program of 
university-based research, and this legislation proposes to expand it 
with a new research grant program to supplement the surprising dearth 
of research that has been conducted on human factors in homeland 
security, including first responder group dynamics, citizens' response 
to disasters, and the human factors behind preparation efforts. We know 
that a primary goal of terrorists is to disrupt social systems, and 
this social disruption is often more devastating to a community then 
the attack itself. I have actively supported both basic and applied 
scientific research throughout my Senate career, and I believe science 
should guide policy. This research grant program will fund research on 
how terrorism and the threat of terrorism impacts the average citizen, 
how the inevitable societal disruption can be mitigated, and will help 
guide disaster planning and optimize the performance of first responder 
units and the systems designed to assist them.
  Historically, some States have benefited more than others under 
traditional grant systems and in response to that situation, our 
leading science funding organizations have developed special programs 
to encourage the growth of research in under represented states. For 
example, the National Science Foundation designed the Experimental 
Program to Stimulate Competitive Research to support academic research 
and development across the nation and to counteract the trend that 
concentrated research expertise in a few states. This bill allows for a 
similar program to be developed within the Department of Homeland 
Security. Homeland security is regional and research and personnel 
expertise must be distributed around the country. Unfortunately, 
terrorist threats against the United States are not restricted to a 
single geographic area, terrorist group, or method of threat. Terrorism 
is possible in many parts of our country that have never had to prepare 
for, or respond to, such attacks. Addressing these threats requires 
regional and local expertise; thus the homeland security- related 
scientific and technological workforce and training must not be overly 
centralized.
  Our country has worked extraordinarily hard to prepare for disaster. 
The Local Preparation Act is designed to assist these preparation 
efforts by guaranteeing adequate numbers of first responders, providing 
them with the training and protection they need, and improving the 
safety and security of our communities. Local preparation is the 
bedrock of our state-wide and national efforts. I firmly believe these 
goals will be achieved through the innovative programs contained in 
this bill. I want to thank Summit participants as well as the men and 
women who have taken time out of their busy schedules to help work 
through the best way to design these new programs. Also, I want to 
thank first responders, both volunteer and career. After all, they are 
the original inspiration for this bill.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2459

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Community Security Act''.

     SEC. 2. TAX INCENTIVES TO FACILITATE TRAINING OR DISASTER 
                   RESPONSE BY INDIVIDUALS SERVING AS VOLUNTEER 
                   FIRST RESPONDERS.

       (a) Findings.--Congress makes the following findings:
       (1) Seventy percent of our Nation's firefighters are 
     volunteers, as are many emergency medical service and police 
     personnel.
       (2) States rely heavily on the services of these volunteer 
     first responders.
       (3) Many career first responders begin as volunteers.
       (4) Volunteer first responders need the same preparation 
     and training as career first responders. Advanced training is 
     frequently required before volunteer first responders can be 
     fully integrated in a State homeland security plan.
       (5) The training and duties of volunteer first responders 
     sometimes conflict with their regular employment for 
     significant periods of time, such as in cases of out-of-State 
     training and disaster response. In these cases employers may 
     need to hire temporary replacement workers or incur other 
     related costs while the volunteer responders are away from 
     work. The burden of temporarily replacing these employees is 
     particularly great for small and single-employer businesses.
       (b) Volunteer First Responder Credit.--
       (1) In general.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by this Act, is amended by adding at the end the following:

     ``SEC. 45G. CREDIT TO EMPLOYERS OF VOLUNTEER FIRST 
                   RESPONDERS.

       ``(a) General Rule.--For purposes of section 38, the 
     volunteer first responder employee credit is an amount equal 
     to 50 percent of the sum of--
       ``(1) the employment credit with respect to all qualified 
     volunteer first responder employees of the taxpayer,
       ``(2) in the case of a small business employer, the 
     replacement credit with respect to all qualified volunteer 
     first responder employees of the taxpayer, plus
       ``(3) the self-employment credit of a qualified volunteer 
     first responder self-employed taxpayer.
       ``(b) Employment Credit.--For purposes of this section--
       ``(1) In general.--The employment credit with respect to 
     any qualified volunteer first responder employee of the 
     taxpayer is an amount equal to the lesser of--
       ``(A) the actual compensation amount with respect to such 
     employee for such taxable year, or
       ``(B) $30,000.
       ``(2) Actual compensation amount.--
       ``(A) In general.--The term `actual compensation amount' 
     means the amount of compensation paid or incurred by the 
     taxpayer with respect to a qualified volunteer first 
     responder employee on any day when such employee was absent 
     from employment for the purpose of participating in a 
     qualified activity.
       ``(B) Compensation.--The term `compensation' means any 
     remuneration for employment, whether in cash or in kind, 
     which is paid or incurred by a taxpayer and which is 
     deductible from the taxpayer's gross income under section 
     162(a)(1).
       ``(3) Limitation.--No credit shall be allowed under this 
     subsection with respect to any day that a qualified volunteer 
     first responder employee who takes part in a qualified 
     activity was not scheduled to work (for reason other than to 
     participate in a qualified activity).
       ``(c) Replacement Credit.--For purposes of this section.--
       ``(1) In general.--The replacement credit with respect to 
     any qualified volunteer first responder employee of the 
     taxpayer is an amount equal to the sum of--
       ``(A) the qualified compensation with respect to each 
     qualified replacement employee of the taxpayer paid by the 
     taxpayer during the taxable year, and
       ``(B) the qualified overtime wages paid by the taxpayer 
     during the taxable year.
       ``(2) Limitation.--The amount of the credit allowed by 
     reason of this subsection shall not exceed $12,000 for any 
     taxable year.
       ``(3) Qualified compensation.--The term `qualified 
     compensation' means--
       ``(A) compensation which is normally contingent on the 
     qualified replacement employee's presence for work and which 
     is deductible from the taxpayer's gross income under section 
     162(a)(1),
       ``(B) compensation which is not characterized by the 
     taxpayer as vacation or holiday pay, or as sick leave or pay, 
     or as any other form of pay for a nonspecific leave of 
     absence, and
       ``(C) group health plan costs (if any) with respect to the 
     qualified replacement employee.
       ``(4) Qualified replacement employee.--The term `qualified 
     replacement employee' means an individual who is hired to 
     replace a qualified volunteer first responder employee, but 
     only with respect to the period during which such employee 
     participates in a qualified activity, including time spent in 
     travel status.
       ``(5) Qualified overtime wages.--For purposes of this 
     section, the term `qualified overtime wages' means overtime 
     wages paid to an employee of the taxpayer (other than a 
     qualified replacement employee) for duties normally performed 
     by a qualified volunteer

[[Page 10523]]

     first responder employee, but only with respect to the period 
     during which such qualified volunteer first responder 
     employee participates in a qualified activity, including time 
     spent in travel status.
       ``(6) Coordination with other credits.--The amount of 
     credit otherwise allowable under sections 51(a) and 1396(a) 
     with respect to any employee shall be reduced by the credit 
     allowed by reason of paragraph (1)(A) with respect to such 
     employee.
       ``(d) Self-Employment Credit.--For purposes of this 
     section--
       ``(1) In general.--The self-employment credit with respect 
     to a qualified volunteer first responder self-employed 
     taxpayer is an amount equal to the amount paid or incurred by 
     such taxpayer with respect to a qualified self-employment 
     replacement employee.
       ``(2) Qualified volunteer first responder self-employed 
     taxpayer.--The term `qualified volunteer first responder 
     self-employed taxpayer' means a taxpayer who--
       ``(A) has self-employment income (as defined in section 
     1402) for the taxable year, and
       ``(B) holds a volunteer position as a firefighter, law 
     enforcement official, or emergency medical service provider.
       ``(3) Qualified self-employment replacement employee.--The 
     term `qualified self-employment replacement employee' means 
     an individual who is hired to replace the qualified volunteer 
     first responder self-employed taxpayer, but only with respect 
     to the period during which such taxpayer participates in a 
     qualified activity, including time spent in travel status.
       ``(e) Definitions and Other Rules.--For purposes of this 
     section--
       ``(1) Qualified volunteer first responder employee.--The 
     term `qualified volunteer first responder employee' means an 
     individual who--
       ``(A) has been an employee of the taxpayer for the 91-day 
     period immediately preceding the period during which the 
     employee participates in a qualified activity, and
       ``(B) holds a volunteer position as a firefighter, law 
     enforcement official, or emergency medical service provider.
       ``(2) Qualified activity.--The term `qualified activity' 
     means--
       ``(A) training with respect to duties performed in 
     connection with the volunteer position of the qualified 
     volunteer first responder employee or qualified volunteer 
     first responder self-employed taxpayer, and
       ``(B) the performance of duties in connection with the 
     volunteer position of the qualified volunteer first responder 
     employee or qualified volunteer first responder self-employed 
     taxpayer, but only to the extent that such duties take not 
     less than 1 day to perform.
       ``(3) Small business employer.--
       ``(A) In general.--The term `small business employer' 
     means, with respect to any taxable year, any employer who 
     employed an average of 200 or fewer employees on business 
     days during such taxable year.
       ``(B) Controlled groups.--For purposes of subparagraph (A), 
     all persons treated as a single employer under subsection 
     (b), (c), (m), or (o) of section 414 shall be treated as a 
     single employer.''.
       (2) Credit made part of general business credit.--Section 
     38(b) of the Internal Revenue Code of 1986 is amended by 
     striking ``plus'' at the end of paragraph (14), by striking 
     the period at the end of paragraph (15) and inserting ``, 
     plus'', and by adding at the end the following new paragraph:
       ``(16) the volunteer first responder employee credit 
     determined under section 45G.''.
       (3) Transition rule.--Section 39(d) of the Internal Revenue 
     Code of 1986 is amended by adding at the end the following 
     new paragraph:
       ``(11) No carryback of volunteer first responder employee 
     credit before enactment.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     volunteer first responder employee credit determined under 
     section 45G may be carried back to a taxable year beginning 
     before January 1, 2004.''.
       (4) Denial of double benefit.--Section 280C(a) of the 
     Internal Revenue Code of 1986 (relating to rule for 
     employment credits) is amended_
       (A) by inserting ``or compensation'' after ``salaries'', 
     and
       (B) by inserting ``45G,'', after ``45A(a),''.
       (5) Conforming amendment.--The table of sections for 
     subpart D of part IV of subchapter A of chapter 1 of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following new item:

``Sec. 45G. Credit to employers of volunteer first responders.''.

       (6) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     2003.
       (c) Deduction for Certain Expenses of Volunteer First 
     Responders.--
       (1) Deduction for travel expenses.--
       (A) Deduction allowed.--Section 162 (relating to certain 
     trade or business expenses) is amended by redesignating 
     subsection (q) as subsection (r) and inserting after 
     subsection (p) the following new subsection:
       ``(q) Treatment of Expenses of Volunteer First 
     Responders.--For purposes of subsection (a)(2), in the case 
     of an individual who participates in a qualified activity 
     (within the meaning of section 45G(e)(2)) as a volunteer 
     first responder (within the meaning of section 224) at any 
     time during the taxable year, such individual shall be deemed 
     to be away from home in the pursuit of a trade or business 
     for any period during which such individual is away from home 
     in connection with such participation.''.
       (B) Deduction allowed whether or not taxpayer elects to 
     itemize.--Section 62(a)(2) (relating to certain trade and 
     business deductions of employees) is amended by adding at the 
     end the following new subparagraph:
       ``(F) Certain expenses of volunteer first responders.--The 
     deductions allowed by section 162 which consist of expenses, 
     determined at a rate not in excess of the rates for travel 
     expenses (including per diem in lieu of subsistence) 
     authorized for employees of agencies under subchapter I of 
     chapter 57 of title 5, United States Code, paid or incurred 
     by the taxpayer in connection with participation in qualified 
     activities (as defined in section 45G(e)(2)) as a volunteer 
     first responder for any period during which such individual 
     is more than 100 miles away from home in connection with such 
     qualified activities.''.
       (2) Deduction for training expenses.--
       (A) In general.--Part VII of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to additional 
     itemized deduction for individuals) is amended by 
     redesignating section 224 as section 225 and by inserting 
     after section 223 the following new section:

     ``SEC. 224. CERTAIN EXPENSES OF VOLUNTEER FIRST RESPONDERS.

       ``(a) In General.--In the case of a volunteer first 
     responder, there shall be allowed as a deduction an amount 
     equal to the expenses paid or incurred by the volunteer first 
     responder necessary for training with respect to duties 
     performed in connection with the volunteer position of such 
     volunteer first responder.
       ``(b) Volunteer First Responder.--For purposes of this 
     section, the term `volunteer first responder' means an 
     individual who holds a volunteer position as a firefighter, 
     law enforcement official, or emergency medical service 
     provider.''.
       (B) Deduction allowed whether or not taxpayer elects to 
     itemize.--Section 62(a) of such Code (relating to adjusted 
     gross income) is amended by adding at the end the following 
     new section:
       ``(20) Volunteer first responder training expenses.--The 
     deduction allowed by section 224.''.
       (C) Conforming amendment.--The table of section for part 
     VII of subchapter B of chapter 1 of such Code is amended by 
     striking the item relating to section 224 and inserting the 
     following:

``Sec. 224. Certain expenses of volunteer first responders.
``Sec. 225. Cross reference.''.

       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 3. CRITICAL NEED GRANTS FOR FIRST RESPONDERS.

       (a) Findings.--Congress finds the following:
       (1) According to a report by the Council on Foreign 
     Relations Independent Task Force, first responders in the 
     United States are underfunded and unprepared for future 
     natural, technological, and human-caused disasters.
       (2) Local firefighters, police officers, and emergency 
     medical personnel are responsible for disaster prevention, 
     mitigation, and response.
       (3) It is essential that first responders have basic safety 
     equipment that is in good working order and customized, if 
     appropriate, to do their jobs as safely and effectively as 
     possible.
       (4) All first responder operation centers need basic 
     communications equipment, including--
       (A) multiple touch-tone phone lines;
       (B) a fax machine with a dedicated phone line;
       (C) a computer with a high-speed connection to the 
     Internet; and
       (D) personal communication devices for shift supervisors, 
     their commanders, and all first responders in a work unit.
       (b) Purpose.--The purpose of this section is to establish a 
     competitive grant program within the Department of Homeland 
     Security to provide first responders with the basic equipment 
     needed to accomplish their homeland security goals.
       (c) Local Critical Need Homeland Security Grants for First 
     Responders.--Title V of the Homeland Security Act of 2002 (6 
     U.S.C. 311 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 510. LOCAL CRITICAL NEED HOMELAND SECURITY GRANTS FOR 
                   FIRST RESPONDERS.

       ``(a) Definitions.--As used in this section, the following 
     definitions shall apply:
       ``(1) Basic personal equipment.--The term `basic personal 
     equipment' means equipment necessary to achieve the standard 
     of basic preparedness established by the Under Secretary for 
     Emergency Preparedness and Response under subsection (d), 
     including--
       ``(A) personal breathing apparatus;
       ``(B) protective equipment; and

[[Page 10524]]

       ``(C) bulletproof vests.
       ``(2) Communications enhancement.--The term `communications 
     enhancement' means improvements to local first responder 
     communications systems that are necessary to achieve the 
     standard of basic preparedness established by the Under 
     Secretary for Emergency Preparedness and Response under 
     subsection (d), including the development or enhancement of--
       ``(A) emergency operations centers;
       ``(B) processes and facilities for information sharing 
     among different levels and first responder units; and
       ``(C) communications capabilities within individual 
     firehouses, police precincts, or other centers of emergency 
     operation.
       ``(b) Standard of Basic Preparedness.--Not later than 
     September 30, 2005, the Under Secretary for Emergency 
     Preparedness and Response shall establish a standard of basic 
     preparedness for local first responders, which shall provide 
     for maximum State flexibility.
       ``(c) Grants Authorized.--The Secretary may award need-
     based, competitive grants to States and units of local 
     government to be used for basic personal equipment and 
     communications enhancement needed to perform their disaster 
     response, mitigation, and recovery missions.
       ``(d) Application.--
       ``(1) In general.--Each eligible entity desiring a grant 
     under this section shall submit an application to the Under 
     Secretary for Emergency Preparedness and Response at such 
     time, in such manner, and containing such information, 
     including the safety and communications equipment to be 
     purchased with grant funds, as the Under Secretary may 
     reasonably require.
       ``(2) Priority.--
       ``(A) In general.--The Under Secretary shall give the 
     highest priority to applicants demonstrating the greatest 
     need for basic personal equipment and communication 
     enhancements when compared to the standard of basic 
     preparedness established under subsection (d).
       ``(B) Interim priority.--Until a standard of basic 
     preparedness is established under subsection (d), the 
     Secretary shall give highest priority to applicants that 
     demonstrate the greatest need for basic personal equipment 
     and communication enhancements when compared to the standard 
     under consideration.
       ``(3) Evaluation plans.--The Secretary shall use evaluation 
     plans under consideration to help determine which applicants 
     will receive grants under this section.
       ``(e) Authorization of Appropriations.--There are 
     authorized to be appropriated, for each of fiscal years 2005 
     through 2007, such sums as may be necessary to carry out this 
     section, which shall remain available until expended.''.

     SEC. 4. SAFE SCHOOLS THROUGH MENTAL HEALTH PROGRAM.

       (a) Grants Authorized.--Subpart 2 of part A of title IV of 
     the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
     7131 et seq.) is amended by adding at the end the following:

     ``SEC. 4131. MENTAL HEALTH PROGRAMS.

       ``(a) Purpose.--The purpose of this section is to provide 
     grants to States and local educational agencies--
       ``(1) to prepare for and respond to disasters or terrorism 
     in or impacting schools;
       ``(2) to prevent avoidable disasters, such as in-school or 
     school-related violence;
       ``(3) to establish community-sustainable mental health 
     programs in schools; and
       ``(4) to train school personnel on mental health issues, 
     including disaster and terrorism prevention, response, and 
     mitigation.
       ``(b) Findings.--Congress makes the following findings:
       ``(1) Schools occupy a unique place in the community. In 
     addition to their main mission of educating children, they 
     serve a public education role and a role in community 
     organization.
       ``(2) Schools have new responsibilities in the homeland 
     security era and in terms of disaster response. Schools often 
     serve as community meeting places, centers of operation for 
     disaster response, and shelters, and have a place in 
     preventing some disasters from happening. Schools may also be 
     called upon to fill novel roles in the case of a disaster, 
     such as keeping children safe after normal school hours.
       ``(3) Some disasters, such as in-school violence, are 
     largely preventable. Mental health professionals in schools 
     may be able to anticipate and prevent school-related 
     disasters and are better positioned to mitigate disaster 
     effects.
       ``(4) After any disaster, people benefit from returning to 
     their normal routine to whatever extent possible. Schools may 
     be in the position to mitigate disaster-related stress.
       ``(c) Definition.--In this section, the term `eligible 
     entity' means a public school or a local educational agency.
       ``(d) Safe Schools Through Mental Health Program.--
       ``(1) Grants authorized.--From funds made available to 
     carry out this subpart under section 4003(2), the Secretary 
     shall award grants to eligible entities to pay the Federal 
     share of the cost of carrying out the activities described in 
     paragraph (3).
       ``(2) Application.--An eligible entity that desires to 
     receive a grant under this subsection shall submit an 
     application to the Secretary at such time, in such manner, 
     and accompanied by such information as the Secretary may 
     require, including a certification that the eligible entity 
     will provide the necessary State or local funding to continue 
     the activities initiated with the grant during the 5-year 
     period beginning on the date on which such grant is awarded.
       ``(3) Uses of funds.--An eligible entity that receives a 
     grant under this subsection may use the grant funds to--
       ``(A) train elementary school and secondary school 
     teachers, administrators, and other professionals to--
       ``(i) identify and prevent avoidable disasters; and
       ``(ii) assist children in dealing with the aftermath of 
     terrorism and disasters or other mental health issues;
       ``(B) provide for school-based mental health professionals 
     to offer services in elementary and secondary schools;
       ``(C) provide mental health services to elementary and 
     secondary school students who face, or have faced, 
     disciplinary action, including students who have been 
     suspended or expelled from school.
       ``(4) Federal share.--The Federal share of the cost of 
     carrying out the activities under paragraph (3) shall be not 
     more than--
       ``(A) 80 percent of the total cost of such activities, in 
     the first year of the grant award;
       ``(B) 60 percent of the total cost of such activities, in 
     the second year of the grant award;
       ``(C) 40 percent of the total cost of such activities, in 
     the third year of the grant award;
       ``(D) 20 percent of the total cost of such activities, in 
     the fourth year of the grant award; and
       ``(E) 0 percent of the total cost of such activities, in 
     the fifth year of the grant award.
       ``(5) State and local funding.--If an eligible entity 
     receiving a grant under this subsection fails to provide 
     sufficient State or local funding, in accordance with 
     paragraph (4), the eligible entity shall be subject to a 
     penalty up to the amount received under this subsection, as 
     determined by the Secretary, which shall be payable to the 
     United States Treasury.
       ``(e) School-Based Disaster Mitigation Refund Program.--
       ``(1) Grants authorized.--From funds made available to 
     carry out this subpart under section 4003(2), the Secretary, 
     in an emergency declared by the President under title V of 
     the Robert T. Stafford Disaster Relief and Emergency 
     Assistance Act (42 U.S.C. 501 et seq.), shall award grants to 
     eligible entities to pay the Federal share of the cost of 
     carrying out the activities described in paragraph (3).
       ``(2) Application.--An eligible entity that desires to 
     receive a grant under this subsection shall submit an 
     application to the Secretary at such time, in such manner, 
     and accompanied by such information as the Secretary may 
     require.
       ``(3) Use of funds.--An eligible entity that receives a 
     grant under this subsection shall use the grant funds to 
     reimburse elementary and secondary schools for costs incurred 
     by such schools--
       ``(A) during a disaster response; and
       ``(B) for in-school mental health counseling for a period 
     of 13 months beginning on the date of the disaster.''.
       (b) Federal Emergency Assistance.--Section 502(a) of the 
     Robert T. Stafford Disaster Relief and Emergency Assistance 
     Act (42 U.S.C. 5192(a)) is amended--
       (1) in paragraph (6), by striking ``and'' at the end;
       (2) in paragraph (7), by striking the period at the end and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(8) provide financial assistance to affected State and 
     local governments for school-based community mental health 
     counseling.''.

     SEC. 5. HOMELAND SECURITY RESEARCH AND DEVELOPMENT GRANT 
                   PROGRAM.

       (a) Findings.--Congress finds the following:
       (1) The Department of Homeland Security is responsible for 
     funding the intramural and extramural research and 
     development to address the Department's scientific and 
     technological needs and requirements.
       (2) Funding has been appropriated to the Department of 
     Homeland Security to carry out significant levels of 
     scientific development, and this funding will likely increase 
     in the future.
       (3) Terrorist threats against the United States are not 
     restricted to a single geographic area, terrorist group, or 
     method of threat. Undefended borders make terrorist attacks 
     possible in places that have never had to prepare for, or 
     respond to, terrorism.
       (4) Every State must be prepared for disasters and will 
     incur costs associated with homeland security.
       (5) States experience varying levels of potential homeland 
     security threats and homeland security concerns vary 
     geographically. Addressing these threats requires regional 
     and local expertise, thus the scientific and technological 
     workforce and training should not be overly centralized.
       (6) Academic research and development funding has not been 
     distributed equitably in the past. Congress has taken steps 
     to resolve

[[Page 10525]]

     this problem. Correcting this inequity will provide 
     beneficial results for science and technology training and 
     research.
       (b) Purpose.--The purpose of this section is to establish a 
     competitive grant program for homeland security research and 
     development.
       (c) Homeland Security Research and Development Grant 
     Program.--Title III of the Homeland Security Act of 2002 (6 
     U.S.C. 181 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 314. COMPETITIVE RESEARCH GRANT PROGRAM.

       ``(a) Establishment.--The Secretary, in consultation with 
     the Under Secretary for Science and Technology, shall 
     establish a Homeland Security Competitive Research Grant 
     Program (referred to in this section as the `Program') to 
     more equitably distribute Federal research and development 
     funds by awarding competitive grants to universities and 
     colleges in eligible States to conduct research projects 
     relating to homeland security.
       ``(b) Eligible States.--During fiscal years 2005 and 2006, 
     colleges and universities located in States and territories 
     that qualify for the National Science Foundation's EPSCoR 
     program or the National Institutes of Health IDeA program 
     shall be eligible for funding under the Program.
       ``(c) Responsibilities.--The Under Secretary for Science 
     and Technology shall--
       ``(1) ensure that not less than 15 percent of the 
     Department's overall academic research funding is allocated 
     to universities and colleges in eligible States;
       ``(2) establish a cofunding mechanism for States with 
     academic facilities that have not fully developed security-
     related science and technology to support burgeoning research 
     efforts by the faculty or link them to established 
     investigators;
       ``(3) provide for conferences, workshops, outreach, and 
     technical assistance to researchers and academic institutions 
     in eligible States on topics related to developing science 
     and technology expertise in areas of high interest and 
     relevance to the Department;
       ``(4) monitor the efforts of States to develop programs 
     that support the Department's mission;
       ``(5) implement a merit review program, consistent with 
     program objectives, to ensure the quality of research 
     conducted with Program funding; and
       ``(6) provide annual reports on the progress and 
     achievements of the Program to the Secretary.
       ``(d) Annual Report.--Not later than March 15 of each year, 
     the Under Secretary for Science and Technology shall submit a 
     report to Congress on the implementation of the Program.
       ``(e) Authorization of Appropriations.--There are 
     authorized to be appropriated--
       ``(1) $5,000,000 for fiscal year 2005 to carry out 
     subsection (c)(3); and
       ``(2) such sums as may be necessary for fiscal year 2006 to 
     carry out this section.''.

     SEC. 6. HOMELAND SECURITY RESEARCH EXPANSION GRANT PROGRAM.

       (a) Findings.--Congress finds the following:
       (1) The Department of Homeland Security should fund 
     research, which explores the innovative human dimensions of 
     homeland security.
       (2) Infrastructure and transportation systems, and the 
     systems designed to protect them, are only as effective as 
     their operators and users.
       (3) Because communication before, during, and after 
     disasters is critical, the understanding of behavioral, 
     psychological, and social sciences in promoting effective 
     communications with homeland security goals in mind is vital 
     to the department's mission.
       (4) Several areas of social science are relevant to 
     homeland security, including--
       (A) theories and data regarding threat communication and 
     the psychological impacts of such threats;
       (B) citizen response to disaster;
       (C) group behavior in response to a threat or actual 
     disaster;
       (D) theories and data about the impact of sustained 
     attention and vigilance on reasoning; and
       (E) risk analysis and decision-making and their application 
     to homeland security.
       (5) Since the primary goal of terrorism is to disrupt 
     social systems, the Department of Homeland Security should 
     support research on how attitudes and beliefs about terrorism 
     impact--
       (A) consumer confidence;
       (B) population mobility;
       (C) decisions about childcare;
       (D) job behaviors; and
       (E) attitudes toward immigrants, political institutions, 
     and leaders.
       (6) Homeland security efforts would benefit from research 
     on--
       (A) the selection, management, and training of security 
     personnel and first responders;
       (B) the impact of stereotyping and marginalization of 
     groups;
       (C) hate crimes;
       (D) the emergence and maintenance of fundamentalist, 
     extremist, and antigovernment groups within the United 
     States; and
       (E) protection against the acts inspired by the groups 
     described in subparagraph (D).
       (b) Purpose.--The purpose of this section is to establish a 
     program to award research grants to examine the social 
     dimensions of terrorism.
       (c) Research Expansion Grants.--Title III of the Homeland 
     Security Act of 2002 (6 U.S.C. 181 et seq.), as amended by 
     section 5, is further amended by adding at the end the 
     following:

     ``SEC. 315. RESEARCH EXPANSION GRANTS.

       ``(a) In General.--The Secretary shall award research 
     grants to colleges and universities to--
       ``(1) analyze group dynamics during periods of extreme 
     stress, including how first responders--
       ``(A) react during such periods;
       ``(B) can be inoculated to stress; and
       ``(C) can help mitigate the stress and social disruption 
     that often accompanies emergency situations;
       ``(2) analyze the social and cultural factors that may 
     affect the performance of first responder groups;
       ``(3) expand human factors research to all other modes of 
     transportation including the use of infrastructure and 
     transportation systems under evacuation circumstances;
       ``(4) develop and demonstrate compliance with operability 
     standards for new technologies designed by human factors 
     experts in conjunction with users;
       ``(5) examine the decision making of voluntary first 
     responders under extended periods of disaster, including 
     whether volunteer first responders would report to their 
     primary jobs or their first responder positions if 
     simultaneously called to both; and
       ``(6) understand how the Homeland Security Advisory System 
     operates as a useful communication tool for citizens.
       ``(b) Application.--Each college and university desiring a 
     grant under this section shall submit an application to the 
     Secretary at such time, in such manner, and containing such 
     information as the Secretary may reasonably require.
       ``(c) Annual Reports.--
       ``(1) Report to secretary.--Grant recipients shall submit 
     an annual report to the Secretary containing specific 
     research findings that may be used to improve emergency 
     preparedness and response efforts.
       ``(2) Report to congress.--The Secretary shall submit an 
     annual report to Congress on the grant program authorized by 
     this section.
       ``(d) Authorization of Appropriations.--There are 
     authorized to be appropriated $40,000,000 for each of the 
     fiscal years 2005 through 2007.''.
                                 ______
                                 
      By Mr. DOMENICI:
  S. 2460. A bill to provide assistance to the State of New Mexico for 
the development of comprehensive State water plans, and for other 
purposes; to the Committee on Energy and Natural Resources.
  Mr. DOMENICI. Mr. President, water is the life's blood for New 
Mexico. When the water dries up in New Mexico, so will many of its 
communities. As such, the scarcity of water in New Mexico is a dire 
situation. Unfortunately, the New Mexico Office of the State Engineer 
(NM OSE) lacks the tools necessary to undertake the Herculean task of 
effectively managing New Mexico's water resources.
  Today, I introduce legislation that would allow New Mexico to make 
informed decisions about its limited water resources.
  In order to effectively perform water rights administration, as well 
as comply with New Mexico's compact deliveries, the State Engineer is 
statutorily required to perform assessments and investigations of the 
numerous stream systems and ground water basins located within New 
Mexico. However, the NM OSE is ill equipped to vigorously and 
comprehensively undertake the daunting but critically important task of 
water resource planning. At present, the NM OSE lacks adequate 
resources to perform necessary hydrographic surveys and data 
collection. As such, ensuring a future water supply for my home state 
requires that Congress provide the NM OSE with the resources necessary 
to fulfill its statutory mandate.
  The bill I introduce today would create a standing authority for the 
State of New Mexico to seek and receive technical assistance from the 
Bureau of Reclamation and the United States Geological Survey. It would 
also provide the NM OSE the sum of $12.5 million in federal assistance 
to perform hydrologic models of New Mexico's most important water 
systems. This bill would provide the NM OSE with the best resources 
available when making crucial decisions about how best preserve our 
limited water stores.

[[Page 10526]]

  Ever decreasing water supplies in New Mexico have reached critical 
levels and require immediate action. The Congress cannot sit idly by as 
water shortages cause death to New Mexico's communities. I hope the 
Senate will give this legislation its every consideration.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2460

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``New Mexico Water Planning 
     Assistance Act''.

     SEC. 2. DEFINITIONS.

       In this Act:
       (1) Secretary.--The term ``Secretary'' means the Secretary 
     of the Interior, acting through the Bureau of Reclamation and 
     the United States Geological Survey.
       (2) State.--The term ``State'' means the State of New 
     Mexico.

     SEC. 3. COMPREHENSIVE WATER PLAN ASSISTANCE.

       (a) In General.-- On the request of the Governor of the 
     State and subject to subsections (b) through (e), the 
     Secretary shall--
       (1) provide to the State technical assistance and grants 
     for the development of comprehensive State water plans;
       (2) conduct water resources mapping in the State; and
       (3) conduct a comprehensive study of groundwater resources 
     (including potable, brackish, and saline water resources) in 
     the State to assess the quantity, quality, and interaction of 
     groundwater and surface water resources.
       (b) Technical Assistance.--Technical assistance provided 
     under subsection (a) may include--
       (1) acquisition of hydrologic data, groundwater 
     characterization, database development, and data 
     distribution;
       (2) expansion of climate, surface water, and groundwater 
     monitoring networks;
       (3) assessment of existing water resources, surface water 
     storage, and groundwater storage potential;
       (4) numerical analysis and modeling necessary to provide an 
     integrated understanding of water resources and water 
     management options;
       (5) participation in State planning forums and planning 
     groups;
       (6) coordination of Federal water management planning 
     efforts;
       (7) technical review of data, models, planning scenarios, 
     and water plans developed by the State; and
       (8) provision of scientific and technical specialists to 
     support State and local activities.
       (c) Allocation.--In providing grants under subsection (a), 
     the Secretary shall, subject to the availability of 
     appropriations, allocate--
       (1) $5,000,000 to develop hydrologic models and acquire 
     associated equipment for the New Mexico Rio Grande main stem 
     sections and Rio Taos and Hondo, Rios Nambe, Pojoaque and 
     Teseque, Rio Chama, and Lower Rio Grande tributaries;
       (2) $1,500,000 to complete the hydrographic survey 
     development of hydrologic models and acquire associated 
     equipment for the San Juan River and tributaries;
       (3) $1,000,000 to complete the hydrographic survey 
     development of hydrologic models and acquire associated 
     equipment for Southwest New Mexico, including the Animas 
     Basin, the Gila River, and tributaries;
       (4) $4,500,000 for statewide digital orthophotography 
     mapping; and
       (5) such sums as are necessary to carry out additional 
     projects consistent with subsection (b).
       (d) Non-Reimbursable and No Cost-sharing.--Any assistance 
     or grants provided to the State under this Act shall be made 
     on a non-reimbursable basis and without a cost-sharing 
     requirement.
       (e) Authorized Transfers.--On request of the State, the 
     Secretary shall directly transfer to 1 or more Federal 
     agencies any amounts made available to the State to carry out 
     this Act.

     SEC. 4. AUTHORIZATION OF APPROPRIATIONS.

       There is authorized to be appropriated to carry out this 
     Act $2,500,000 for each of fiscal years 2005 through 2009.
                                 ______
                                 
      By Mr. DeWINE (for himself and Mr. Kennedy):
  S. 2461. A bill to protect the public health by providing the Food 
and Drug Administration with certain authority to regulate tobacco 
products; to the Committee on Health, Education, Labor, and Pensions.
  Mr. DeWINE. Mr. President, today I join our colleague from 
Massachusetts, Senator Kennedy, to introduce a bill designed to help 
protect consumers--especially children--from the dangers of tobacco. 
Simply, our bill would finally give the Food and Drug Administration 
(FDA) the authority it needs to effectively regulate the manufacture 
and sale of tobacco products.
  I say finally, because there are some tobacco proponents who would 
have you believe that the Master Settlement Agreement, which was signed 
in 1998 by 46 States, resolved the issue of youth tobacco use by 
imposing advertising restrictions.
  I say finally, because my colleagues--first Senator McCain, then 
Senator Frist, then Senator Gregg, and then Senator Kennedy and I--have 
been seeking FDA regulation of tobacco products since the mid to late 
1990's.
  And, I say finally, because the bill that we are introducing today is 
the product of long and hard discussions and negotiations that I have 
had with Senator Kennedy and public interest groups and industry. Our 
bill has the support of Campaign for Tobacco Free Kids. Our bill has 
the support of Philip Morris. Our bill has the support of the American 
Heart Association, the American Lung Association, and the American 
Cancer Association. It is a bill that I am proud of, that is worthy of 
the Senate's consideration, and that will provide the FDA--finally--
with strong and effective authority over the regulation of tobacco 
products.
  I realize full well that tobacco users and non-users, alike, 
recognize and understand that tobacco products are hazardous to their 
health. We all know that smoking is not a healthy habit. But, that's an 
obvious point in comparison to the fact that right now, many consumers, 
including smokers, are surprised to learn that no Federal agency has 
the authority to require tobacco companies to list the ingredients that 
are in their products--things like trace amounts of arsenic, 
formaldehyde, and ammonia. And, no Federal agency has the authority to 
inspect tobacco manufacturers--how the cigarette and smokeless tobacco 
products are made, whether the manufacturers' machines and equipment 
are clean, etc.
  While simply listing the ingredients, toxic as they may be, might not 
seem like much to some, think of it this way: Current law makes sure we 
know what's in products designed to help people quit smoking, like 
``the patch'' or Nicorette gum, but not the very products that get 
people addicted in the first place--the cigarettes. That is absolutely 
absurd!
  Think about this: Right now, the Food and Drug Administration (FDA) 
requires Philip Morris/Altria to print the ingredients in its Kraft 
``Macaroni and Cheese,'' but not the ingredients in its cigarettes--a 
product that contributes to the deaths of more than 440,000 people a 
year.
  Right now, the FDA requires Philip Morris-owned Nabisco to print the 
ingredients contained in ``Oreo Cookies'' and ``Ritz Crackers,'' but 
not the ingredients in its cigarettes--even though cigarettes cause 
one-third of all cancer deaths and 90 percent of lung cancer deaths. It 
is unfathomable to me that we would require the listing of ingredients 
on these products, yet not require the listing of ingredients for one 
of the leading causes of death and disease.
  Right now, the FDA requires the printed ingredients for chewing gum, 
lipstick, bottled water, and ice cream, but not for cigarettes--a 
product that causes 20% of all heart disease deaths and is the leading 
cause of preventable death in the United States.
  Think about this: If a company wants to market a food product as 
``fat-free'' or ``reduced-fat'' or ``lite,'' that company is required 
to meet certain standards regarding the number of calories or the 
amount of fat grams in that product. Yet, cigarette companies can call 
a cigarette a ``light'' or ``mild'' and not reveal a thing about the 
amount of tar or nicotine or arsenic in that supposedly ``light'' 
cigarette.
  Not having access to all the information about this deadly product 
just makes no sense, and it is something that needs to change. By 
introducing this bill, we are finally saying that we are not going to 
let tobacco manufacturers have free reign over their markets and 
consumers any more.
  Today, we are taking a step toward making sure the public gets 
adequate information about whether to continue

[[Page 10527]]

to smoke or even to start smoking in the first place. With this bill, 
we are not just saying ``buyer beware.'' We are saying ``tobacco 
companies be honest.'' We are saying ``tobacco companies stop marketing 
to innocent children.'' We are saying ``tobacco companies tell 
consumers about what they are really buying.''
  The legislation that Senator Kennedy and I are introducing would do 
just that.
  One of the most dramatic changes our bill makes is that tobacco 
products will now have to be approved before they reach consumer hands. 
It just makes sense that tobacco products should not be able to imply 
that they may be safer or less harmful to consumers because they use 
descriptors such as ``light'' or ``mild'' or ``low'' to characterize 
the level of a substance in a product. The National Cancer Institute 
has found that many smokers mistakenly believe that ``low tar'' and 
``light'' cigarettes cause fewer health problems than other cigarettes. 
Our bill would require specific approval by the FDA to use those words, 
so that consumers could be informed.
  For the first time ever, all new tobacco products entering the market 
would have to be approved by the FDA. Obviously, we already know that 
smoking is a health risk. But, what we don't know about is the harm 
caused by or what adverse health effects are created by the other 
ingredients in tobacco products or by how the tobacco is burned. There 
are tobacco products on the market that are not conventional 
cigarettes. They have carbon filters running down the center of them. 
They are sophisticated products that burn tobacco differently, that 
affect the body differently, and that may cause people to smoke them 
differently.
  According to the Department of Health and Human Services, in an 
October article of the Journal of the National Cancer Institute, ``the 
only proven method to reduce tobacco-related cancer risk is to stop 
smoking.'' Yet, often times, people cannot quit. It is very difficult 
to quit ingesting an addictive product. People are addicted to the 
nicotine in the tobacco product and are just simply unable to quit 
using it. So, tobacco companies have responded by developing and 
marketing tobacco products that purport to be ``reduced-risk'' or 
``safer.''
  Take, for example, a person who smokes Marlboro cigarettes--just 
plain Marlboro cigarettes, the ones in the red package. Let's say that 
person would like to quit smoking, has tried to quit smoking a number 
of times, but just hasn't been successful. So instead of quitting 
outright, that person figures they will switch the type of cigarette 
they smoke to a cigarette that has the implied claim of being 
``safer''--like a ``light'' cigarette or a ``mild'' cigarette or a 
``low tar'' cigarette. Those cigarettes have not been found to be any 
safer? In fact, just the opposite has been discovered.
  In a 2001 National Cancer Institute publication, they wrote the 
following:

       The tobacco companies set out to develop cigarette designs 
     that markedly lowered the tar and nicotine yield results as 
     measured by the Federal Trade Commission (FTC) testing 
     method. Yet, these cigarettes can be manipulated by the 
     smoker to increase the intake of tar and nicotine. The use of 
     these ``decreased risk'' cigarettes have not significantly 
     decreased the disease risk. In fact, the use of these 
     cigarettes may be partly responsible for the increase in lung 
     cancer for long-term smokers who have switched to the low-
     tar/low-nicotine brands. Finally, switching to these 
     cigarettes may provide smokers with a false sense of reduced 
     risk, when the actual amount of tar and nicotine consumed may 
     be the same as, or more than, the previously used higher 
     yield brand.

  So the products that tobacco companies develop and market as being 
``safer'' are not safer. Rather than people quitting smoking entirely, 
they are often misled into thinking that the ``light'' or ``mild'' 
cigarettes that they switch to are better for them. In addition, people 
may begin to start smoking because they think some of these products 
aren't so bad for them--that the products have been made safer or 
better for them somehow and are okay to smoke.
  Tobacco companies are able to make these implied health claims about 
their products because they are not regulated. Consumers have no choice 
but to trust the tobacco companies to reveal the ingredients and 
marketing claims about their products. That is just absurd to me. These 
are all things that should be examined, reviewed, and commented on by 
the Food and Drug Administration to determine whether it is appropriate 
for these products to be marketed as ``reduced-risk'' products, so the 
public knows what they are choosing to consume.
  Tobacco advertising is in magazines and on billboards along the 
highway. Tobacco advertising is in convenience stores, along the aisles 
and at the checkout counter right beside the candy where children are 
likely to see it. Tobacco advertising is at sporting events, part of 
promotional items, where consumers can ``buy 1 get 1 free.'' Tobacco 
advertising is on the Internet and in the daily delivery of mail.
  Our bill would make changes regarding tobacco advertising. It would 
give the FDA authority to restrict tobacco industry marketing--
consistent with the First Amendment--that targets our children. Our 
bill would require advertisements to be in black and white text only 
and would define adult publication in terms of readership.
  An issue that is related to advertising and marketing of tobacco 
products has to do with the flavored tobacco products, which clearly 
target our children. We have probably all seen the flavored 
cigarettes--flavors like strawberry, chocolate, and wild rum. The scent 
of strawberry filters through the unopened pack of cigarettes. And 
guess what, the cigarettes smell like candy. A recent New York Times 
article described the scent of chocolate flavored cigarettes as if 
``someone had lifted the lid on a Whitman Sampler.''
  I can't speak for every parent, but I know my 8 grandchildren like 
candy, and they like the smell of chocolate, and they would be curious 
to try something that smells or tastes like candy. Cigarettes shouldn't 
be flavored and marketed in such a way to attract children and to 
encourage children to smoke. Our bill bans the use of flavors such as 
strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, 
coconut, coffee and other flavorings that would attract children to the 
product.
  Despite the fact that 40 million Americans use tobacco products, many 
of them do not know what is inside the cigarette or the tobacco product 
they ingest. They do not know the ingredients or the constituents, like 
tar or nicotine, that are in the products they use. Consumers do not 
know what additives are included in the product. Additives like ammonia 
or urea, both of which may make the tobacco product more addictive 
because they increase the delivery of nicotine. Tobacco companies do 
not disclose the specific ingredients in their products because they 
don't have to. Tobacco products are unregulated.
  Our legislation would give consumers more information about what's in 
tobacco products. Specifically, the bill would provide the FDA with the 
ability to publish the ingredients of tobacco products.
  It would require a listing of all ingredients, substances, and 
compounds added by the manufacturer to the tobacco, paper, or filter.
  It would require a description of the content, delivery, and form of 
nicotine in each tobacco product.
  It would require information on the health, behavioral, or 
physiologic effects of the tobacco products.
  I think it is equally important that I mention what our bill does not 
do. Here are some of the areas where authority is not conferred to FDA: 
Our bill does not allow FDA to ban tobacco products or to eliminate 
nicotine from a tobacco product. The bill ensures that FDA will not 
have the power to use its ``performance standard'' authority to ban 
cigarettes, smokeless tobacco or any other category of tobacco 
products, or to reduce their nicotine yields to zero.
  Our bill does not allow FDA to establish a minimum smoking age higher 
than 18. The bill explicitly forbids FDA from establishing a minimum 
age higher than 18 years of age to purchase tobacco products.
  Our bill treats all tobacco retailers equally. Our bill specifically 
provides

[[Page 10528]]

that FDA can't prohibit the sale of tobacco products in any particular 
category of retail outlet. Our bill forbids FDA from creating a more 
permissive set of advertising rules for adult-only establishments. This 
provision protects retailers and convenience store owners.
  Finally, I would like to make a comment about the tobacco farmers. 
There has been a lot of talk recently about the need for a buyout for 
our Nation's tobacco farmers. My colleagues, Senator McConnell and 
Senator Dole, have been working tirelessly to craft a buyout bill for 
tobacco farmers. They need a buyout--and the Congress should give them 
one. The Senate needs to pass the buyout, but the buyout needs to be 
passed along with this FDA bill. I look forward to working with my 
colleagues from the tobacco-growing states to make this happen.
  The bill that Senator Kennedy and I introduce today gives the FDA the 
authority to regulate a product that has gone unregulated for far too 
long--a product that for the past century has not revealed its 
ingredients to the consumer--a product whose manufacturing facilities 
are not inspected or accountable for following good manufacturing 
practices--a product that is never reviewed or approved before reaching 
the hands of 40 million consumers, many of whom are just children. 
Congress needs to put an end to this. Congress should put an end to the 
marketing of tobacco products to our children. Congress should put an 
end to the ability of tobacco companies to make claims, whether they 
are implied claims or direct claims, about their products. Congress 
should put an end to tobacco companies putting any ingredient they want 
into their products without disclosing it to the consumer. It is time 
Congress give the FDA authority to it needs to fix these problems.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2461

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Family 
     Smoking Prevention and Tobacco Control Act''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Purpose.
Sec. 4. Scope and effect.
Sec. 5. Severability.

         TITLE I--AUTHORITY OF THE FOOD AND DRUG ADMINISTRATION

Sec. 101. Amendment of Federal food, drug, and cosmetic act.
Sec. 102. Construction of current regulations.
Sec. 103. Conforming and other amendments to general provisions.

 TITLE II--TOBACCO PRODUCT WARNINGS; CONSTITUENT AND SMOKE CONSTITUENT 
                               DISCLOSURE

Sec. 201. Cigarette label and advertising warnings.
Sec. 202. Authority to revise cigarette warning label Statements.
Sec. 203. State regulation of cigarette advertising and promotion.
Sec. 204. Smokeless tobacco labels and advertising warnings.
Sec. 205. Authority to revise smokeless tobacco product warning label 
              Statements.
Sec. 206. Tar, nicotine, and other smoke constituent disclosure to the 
              public.

       TITLE III--PREVENTION OF ILLICIT TRADE IN TOBACCO PRODUCTS

Sec. 301. Labeling, record keeping, records inspection.
Sec. 302. Study and report.

     SEC. 2. FINDINGS.

       The Congress finds the following:
       (1) The use of tobacco products by the Nation's children is 
     a pediatric disease of considerable proportions that results 
     in new generations of tobacco-dependent children and adults.
       (2) A consensus exists within the scientific and medical 
     communities that tobacco products are inherently dangerous 
     and cause cancer, heart disease, and other serious adverse 
     health effects.
       (3) Nicotine is an addictive drug.
       (4) Virtually all new users of tobacco products are under 
     the minimum legal age to purchase such products.
       (5) Tobacco advertising and marketing contribute 
     significantly to the use of nicotine-containing tobacco 
     products by adolescents.
       (6) Because past efforts to restrict advertising and 
     marketing of tobacco products have failed adequately to curb 
     tobacco use by adolescents, comprehensive restrictions on the 
     sale, promotion, and distribution of such products are 
     needed.
       (7) Federal and State governments have lacked the legal and 
     regulatory authority and resources they need to address 
     comprehensively the public health and societal problems 
     caused by the use of tobacco products.
       (8) Federal and State public health officials, the public 
     health community, and the public at large recognize that the 
     tobacco industry should be subject to ongoing oversight.
       (9) Under Article I, Section 8 of the Constitution, the 
     Congress is vested with the responsibility for regulating 
     interstate commerce and commerce with Indian tribes.
       (10) The sale, distribution, marketing, advertising, and 
     use of tobacco products are activities in and substantially 
     affecting interstate commerce because they are sold, 
     marketed, advertised, and distributed in interstate commerce 
     on a nationwide basis, and have a substantial effect on the 
     Nation's economy.
       (11) The sale, distribution, marketing, advertising, and 
     use of such products substantially affect interstate commerce 
     through the health care and other costs attributable to the 
     use of tobacco products.
       (12) It is in the public interest for Congress to enact 
     legislation that provides the Food and Drug Administration 
     with the authority to regulate tobacco products and the 
     advertising and promotion of such products. The benefits to 
     the American people from enacting such legislation would be 
     significant in human and economic terms.
       (13) Tobacco use is the foremost preventable cause of 
     premature death in America. It causes over 400,000 deaths in 
     the United States each year and approximately 8,600,000 
     Americans have chronic illnesses related to smoking.
       (14) Reducing the use of tobacco by minors by 50 percent 
     would prevent well over 6,500,000 of today's children from 
     becoming regular, daily smokers, saving over 2,000,000 of 
     them from premature death due to tobacco induced disease. 
     Such a reduction in youth smoking would also result in 
     approximately $75,000,000,000 in savings attributable to 
     reduced health care costs.
       (15) Advertising, marketing, and promotion of tobacco 
     products have been especially directed to attract young 
     persons to use tobacco products and these efforts have 
     resulted in increased use of such products by youth. Past 
     efforts to oversee these activities have not been successful 
     in adequately preventing such increased use.
       (16) In 2001, the tobacco industry spent more than 
     $11,000,000,000 to attract new users, retain current users, 
     increase current consumption, and generate favorable long-
     term attitudes toward smoking and tobacco use.
       (17) Tobacco product advertising often misleadingly 
     portrays the use of tobacco as socially acceptable and 
     healthful to minors.
       (18) Tobacco product advertising is regularly seen by 
     persons under the age of 18, and persons under the age of 18 
     are regularly exposed to tobacco product promotional efforts.
       (19) Through advertisements during and sponsorship of 
     sporting events, tobacco has become strongly associated with 
     sports and has become portrayed as an integral part of sports 
     and the healthy lifestyle associated with rigorous sporting 
     activity.
       (20) Children are exposed to substantial and unavoidable 
     tobacco advertising that leads to favorable beliefs about 
     tobacco use, plays a role in leading young people to 
     overestimate the prevalence of tobacco use, and increases the 
     number of young people who begin to use tobacco.
       (21) The use of tobacco products in motion pictures and 
     other mass media glamorizes its use for young people and 
     encourages them to use tobacco products.
       (22) Tobacco advertising expands the size of the tobacco 
     market by increasing consumption of tobacco products 
     including tobacco use by young people.
       (23) Children are more influenced by tobacco advertising 
     than adults, they smoke the most advertised brands.
       (24) Tobacco company documents indicate that young people 
     are an important and often crucial segment of the tobacco 
     market. Children, who tend to be more price-sensitive than 
     adults, are influenced by advertising and promotion practices 
     that result in drastically reduced cigarette prices.
       (25) Comprehensive advertising restrictions will have a 
     positive effect on the smoking rates of young people.
       (26) Restrictions on advertising are necessary to prevent 
     unrestricted tobacco advertising from undermining legislation 
     prohibiting access to young people and providing for 
     education about tobacco use.
       (27) International experience shows that advertising 
     regulations that are stringent and comprehensive have a 
     greater impact on overall tobacco use and young people's use 
     than weaker or less comprehensive ones.

[[Page 10529]]

       (28) Text only requirements, although not as stringent as a 
     ban, will help reduce underage use of tobacco products while 
     preserving the informational function of advertising.
       (29) It is in the public interest for Congress to adopt 
     legislation to address the public health crisis created by 
     actions of the tobacco industry.
       (30) The final regulations promulgated by the Secretary of 
     Health and Human Services in the August 28, 1996, issue of 
     the Federal Register (61 Fed. Reg. 44615-44618) for inclusion 
     as part 897 of title 21, Code of Federal Regulations, are 
     consistent with the First Amendment to the United States 
     Constitution and with the standards set forth in the 
     amendments made by this Act for the regulation of tobacco 
     products by the Food and Drug Administration and the 
     restriction on the sale and distribution, including access to 
     and the advertising and promotion of, tobacco products 
     contained in such regulations are substantially related to 
     accomplishing the public health goals of this Act.
       (31) The regulations described in paragraph (30) will 
     directly and materially advance the Federal Government's 
     substantial interest in reducing the number of children and 
     adolescents who use cigarettes and smokeless tobacco and in 
     preventing the life-threatening health consequences 
     associated with tobacco use. An overwhelming majority of 
     Americans who use tobacco products begin using such products 
     while they are minors and become addicted to the nicotine in 
     those products before reaching the age of 18. Tobacco 
     advertising and promotion plays a crucial role in the 
     decision of these minors to begin using tobacco products. 
     Less restrictive and less comprehensive approaches have not 
     and will not be effective in reducing the problems addressed 
     by such regulations. The reasonable restrictions on the 
     advertising and promotion of tobacco products contained in 
     such regulations will lead to a significant decrease in the 
     number of minors using and becoming addicted to those 
     products.
       (32) The regulations described in paragraph (30) impose no 
     more extensive restrictions on communication by tobacco 
     manufacturers and sellers than are necessary to reduce the 
     number of children and adolescents who use cigarettes and 
     smokeless tobacco and to prevent the life-threatening health 
     consequences associated with tobacco use. Such regulations 
     are narrowly tailored to restrict those advertising and 
     promotional practices which are most likely to be seen or 
     heard by youth and most likely to entice them into tobacco 
     use, while affording tobacco manufacturers and sellers ample 
     opportunity to convey information about their products to 
     adult consumers.
       (33) Tobacco dependence is a chronic disease, one that 
     typically requires repeated interventions to achieve long-
     term or permanent abstinence.
       (34) Because the only known safe alternative to smoking is 
     cessation, interventions should target all smokers to help 
     them quit completely.
       (35) Tobacco products have been used to facilitate and 
     finance criminal activities both domestically and 
     internationally. Illicit trade of tobacco products has been 
     linked to organized crime and terrorist groups.
       (36) It is essential that the Food and Drug Administration 
     review products sold or distributed for use to reduce risks 
     or exposures associated with tobacco products and that it be 
     empowered to review any advertising and labeling for such 
     products. It is also essential that manufacturers, prior to 
     marketing such products, be required to demonstrate that such 
     products will meet a series of rigorous criteria, and will 
     benefit the health of the population as a whole, taking into 
     account both users of tobacco products and persons who do not 
     currently use tobacco products.
       (37) Unless tobacco products that purport to reduce the 
     risks to the public of tobacco use actually reduce such 
     risks, those products can cause substantial harm to the 
     public health to the extent that the individuals, who would 
     otherwise not consume tobacco products or would consume such 
     products less, use tobacco products purporting to reduce 
     risk. Those who use products sold or distributed as modified 
     risk products that do not in fact reduce risk, rather than 
     quitting or reducing their use of tobacco products, have a 
     substantially increased likelihood of suffering disability 
     and premature death. The costs to society of the widespread 
     use of products sold or distributed as modified risk products 
     that do not in fact reduce risk or that increase risk include 
     thousands of unnecessary deaths and injuries and huge costs 
     to our health care system.
       (38) As the National Cancer Institute has found, many 
     smokers mistakenly believe that ``low tar'' and ``light'' 
     cigarettes cause fewer health problems than other cigarettes. 
     As the National Cancer Institute has also found, mistaken 
     beliefs about the health consequences of smoking ``low tar'' 
     and ``light'' cigarettes can reduce the motivation to quit 
     smoking entirely and thereby lead to disease and death.
       (39) Recent studies have demonstrated that there has been 
     no reduction in risk on a population-wide basis from ``low 
     tar'' and ``light'' cigarettes and such products may actually 
     increase the risk of tobacco use.
       (40) The dangers of products sold or distributed as 
     modified risk tobacco products that do not in fact reduce 
     risk are so high that there is a compelling governmental 
     interest in insuring that statements about modified risk 
     tobacco products are complete, accurate, and relate to the 
     overall disease risk of the product.
       (41) As the Federal Trade Commission has found, consumers 
     have misinterpreted advertisements in which one product is 
     claimed to be less harmful than a comparable product, even in 
     the presence of disclosures and advisories intended to 
     provide clarification.
       (42) Permitting manufacturers to make unsubstantiated 
     statements concerning modified risk tobacco products, whether 
     express or implied, even if accompanied by disclaimers would 
     be detrimental to the public health.
       (43) The only way to effectively protect the public health 
     from the dangers of unsubstantiated modified risk tobacco 
     products is to empower the Food and Drug Administration to 
     require that products that tobacco manufacturers sold or 
     distributed for risk reduction be approved in advance of 
     marketing, and to require that the evidence relied on to 
     support approval of these products is rigorous.

     SEC. 3. PURPOSE.

       The purposes of this Act are--
       (1) to provide authority to the Food and Drug 
     Administration to regulate tobacco products under the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), by 
     recognizing it as the primary Federal regulatory authority 
     with respect to the manufacture, marketing, and distribution 
     of tobacco products;
       (2) to ensure that the Food and Drug Administration has the 
     authority to address issues of particular concern to public 
     health officials, especially the use of tobacco by young 
     people and dependence on tobacco;
       (3) to authorize the Food and Drug Administration to set 
     national standards controlling the manufacture of tobacco 
     products and the identity, public disclosure, and amount of 
     ingredients used in such products;
       (4) to provide new and flexible enforcement authority to 
     ensure that there is effective oversight of the tobacco 
     industry's efforts to develop, introduce, and promote less 
     harmful tobacco products;
       (5) to vest the Food and Drug Administration with the 
     authority to regulate the levels of tar, nicotine, and other 
     harmful components of tobacco products;
       (6) in order to ensure that consumers are better informed, 
     to require tobacco product manufacturers to disclose research 
     which has not previously been made available, as well as 
     research generated in the future, relating to the health and 
     dependency effects or safety of tobacco products;
       (7) to continue to permit the sale of tobacco products to 
     adults in conjunction with measures to ensure that they are 
     not sold or accessible to underage purchasers;
       (8) to impose appropriate regulatory controls on the 
     tobacco industry;
       (9) to promote cessation to reduce disease risk and the 
     social costs associated with tobacco related diseases; and
       (10) to strengthen legislation against illicit trade in 
     tobacco products.

     SEC. 4. SCOPE AND EFFECT.

       (a) Intended Effect.--Nothing in this Act (or an amendment 
     made by this Act) shall be construed to--
       (1) establish a precedent with regard to any other 
     industry, situation, circumstance, or legal action; or
       (2) affect any action pending in Federal, State, or Tribal 
     court, or any agreement, consent decree, or contract of any 
     kind.
       (b) Agricultural Activities.--The provisions of this Act 
     (or an amendment made by this Act) which authorize the 
     Secretary to take certain actions with regard to tobacco and 
     tobacco products shall not be construed to affect any 
     authority of the Secretary of Agriculture under existing law 
     regarding the growing, cultivation, or curing of raw tobacco.

     SEC. 5. SEVERABILITY.

       If any provision of this Act, the amendments made by this 
     Act, or the application of any provision of this Act to any 
     person or circumstance is held to be invalid, the remainder 
     of this Act, the amendments made by this Act, and the 
     application of the provisions of this Act to any other person 
     or circumstance shall not be affected and shall continue to 
     be enforced to the fullest extent possible.

         TITLE I--AUTHORITY OF THE FOOD AND DRUG ADMINISTRATION

     SEC. 101. AMENDMENT OF FEDERAL FOOD, DRUG, AND COSMETIC ACT.

       (a) Definition of Tobacco Products.--Section 201 of the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321) is 
     amended by adding at the end the following:
       ``(nn)(1) The term `tobacco product' means any product made 
     or derived from tobacco that is intended for human 
     consumption, including any component, part, or accessory of a 
     tobacco product (except for raw materials other than tobacco 
     used in manufacturing a component, part, or accessory of a 
     tobacco product).
       ``(2) The term `tobacco product' does not mean--
       ``(A) a product in the form of conventional food (including 
     water and chewing gum), a

[[Page 10530]]

     product represented for use as or for use in a conventional 
     food, or a product that is intended for ingestion in capsule, 
     tablet, softgel, or liquid form; or
       ``(B) an article that is approved or is regulated as a drug 
     by the Food and Drug Administration.
       ``(3) The products described in paragraph (2)(A) shall be 
     subject to chapter IV or chapter V of this Act and the 
     articles described in paragraph (2)(B) shall be subject to 
     chapter V of this Act.
       ``(4) A tobacco product may not be marketed in combination 
     with any other article or product regulated under this Act 
     (including a drug, biologic, food, cosmetics, medical device, 
     or a dietary supplement).''.
       (b) FDA Authority Over Tobacco Products.--The Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) is amended--
       (1) by redesignating chapter IX as chapter X;
       (2) by redesignating sections 901 through 907 as sections 
     1001 through 1007; and
       (3) by inserting after section 803 the following:

                     ``CHAPTER IX--TOBACCO PRODUCTS

     ``SEC. 900. DEFINITIONS.

       ``In this chapter:
       ``(1) Additive.--The term `additive' means any substance 
     the intended use of which results or may reasonably be 
     expected to result, directly or indirectly, in its becoming a 
     component or otherwise affecting the characteristic of any 
     tobacco product (including any substances intended for use as 
     a flavoring, coloring or in producing, manufacturing, 
     packing, processing, preparing, treating, packaging, 
     transporting, or holding), except that such term does not 
     include tobacco or a pesticide chemical residue in or on raw 
     tobacco or a pesticide chemical.
       ``(2) Brand.--The term `brand' means a variety of tobacco 
     product distinguished by the tobacco used, tar content, 
     nicotine content, flavoring used, size, filtration, or 
     packaging, logo, registered trademark or brand name, 
     identifiable pattern of colors, or any combination of such 
     attributes.
       ``(3) Cigarette.--The term `cigarette' has the meaning 
     given that term by section 3(1) of the Federal Cigarette 
     Labeling and Advertising Act (15 U.S.C. 1332(1)), but also 
     includes tobacco, in any form, that is functional in the 
     product, which, because of its appearance, the type of 
     tobacco used in the filler, or its packaging and labeling, is 
     likely to be offered to, or purchased by, consumers as a 
     cigarette or as roll-your-own tobacco.
       ``(4) Cigarette tobacco.--The term `cigarette tobacco' 
     means any product that consists of loose tobacco that is 
     intended for use by consumers in a cigarette. Unless 
     otherwise stated, the requirements for cigarettes shall also 
     apply to cigarette tobacco.
       ``(5) Commerce.--The term `commerce' has the meaning given 
     that term by section 3(2) of the Federal Cigarette Labeling 
     and Advertising Act (15 U.S.C. 1332(2)).
       ``(6) Counterfeit tobacco product.--The term `counterfeit 
     tobacco product' means a tobacco product (or the container or 
     labeling of such a product) that, without authorization, 
     bears the trademark, trade name, or other identifying mark, 
     imprint or device, or any likeness thereof, of a tobacco 
     product listed in a registration under section 905(i)(1).
       ``(7) Distributor.--The term `distributor' as regards a 
     tobacco product means any person who furthers the 
     distribution of a tobacco product, whether domestic or 
     imported, at any point from the original place of manufacture 
     to the person who sells or distributes the product to 
     individuals for personal consumption. Common carriers are not 
     considered distributors for purposes of this chapter.
       ``(8) Illicit trade.--The term `illicit trade' means any 
     practice or conduct prohibited by law which relates to 
     production, shipment, receipt, possession, distribution, 
     sale, or purchase of tobacco products including any practice 
     or conduct intended to facilitate such activity.
       ``(9) Indian tribe.--The term `Indian tribe' has the 
     meaning given such term in section 4(e) of the Indian Self 
     Determination and Education Assistance Act (25 U.S.C. 
     450b(e)).
       ``(10) Little cigar.--The term `little cigar' has the 
     meaning given that term by section 3(7) of the Federal 
     Cigarette Labeling and Advertising Act (15 U.S.C. 1332(7)).
       ``(11) Nicotine.--The term `nicotine' means the chemical 
     substance named 3-(1-Methyl-2-pyrrolidinyl) pyridine or 
     C[10]H[14]N[2], including any salt or complex of nicotine.
       ``(12) Package.--The term `package' means a pack, box, 
     carton, or container of any kind or, if no other container, 
     any wrapping (including cellophane), in which a tobacco 
     product is offered for sale, sold, or otherwise distributed 
     to consumers.
       ``(13) Retailer.--The term `retailer' means any person who 
     sells tobacco products to individuals for personal 
     consumption, or who operates a facility where self-service 
     displays of tobacco products are permitted.
       ``(14) Roll-your-own tobacco.--The term `roll-your-own 
     tobacco' means any tobacco which, because of its appearance, 
     type, packaging, or labeling, is suitable for use and likely 
     to be offered to, or purchased by, consumers as tobacco for 
     making cigarettes.
       ``(15) Smoke constituent.--The term `smoke constituent' 
     means any chemical or chemical compound in mainstream or 
     sidestream tobacco smoke that either transfers from any 
     component of the cigarette to the smoke or that is formed by 
     the combustion or heating of tobacco, additives, or other 
     component of the tobacco product.
       ``(16) Smokeless tobacco.--The term `smokeless tobacco' 
     means any tobacco product that consists of cut, ground, 
     powdered, or leaf tobacco and that is intended to be placed 
     in the oral or nasal cavity.
       ``(17) State.--The term `State' means any State of the 
     United States and, for purposes of this chapter, includes the 
     District of Columbia, the Commonwealth of Puerto Rico, Guam, 
     the Virgin Islands, American Samoa, Wake Island, Midway 
     Islands, Kingman Reef, Johnston Atoll, the Northern Mariana 
     Islands, and any other trust territory or possession of the 
     United States.
       ``(18) Tobacco product manufacturer.--Term `tobacco product 
     manufacturer' means any person, including any repacker or 
     relabeler, who--
       ``(A) manufactures, fabricates, assembles, processes, or 
     labels a tobacco product; or
       ``(B) imports a finished cigarette or smokeless tobacco 
     product for sale or distribution in the United States.
       ``(19) United states.--The term `United States' means the 
     50 States of the United States of America and the District of 
     Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin 
     Islands, American Samoa, Wake Island, Midway Islands, Kingman 
     Reef, Johnston Atoll, the Northern Mariana Islands, and any 
     other trust territory or possession of the United States.

     ``SEC. 901. FDA AUTHORITY OVER TOBACCO PRODUCTS.

        ``(a) In General.--Tobacco products shall be regulated by 
     the Secretary under this chapter and shall not be subject to 
     the provisions of chapter V, unless--
       ``(1) such products are intended for use in the diagnosis, 
     cure, mitigation, treatment, or prevention of disease (within 
     the meaning of section 201(g)(1)(B) or section 201(h)(2)); or
       ``(2) a claim is made for such products under section 
     201(g)(1)(C) or 201(h)(3);
     other than modified risk tobacco products approved in 
     accordance with section 911.
       ``(b) Applicability.--This chapter shall apply to all 
     tobacco products subject to the regulations referred to in 
     section 102 of the Family Smoking Prevention and Tobacco 
     Control Act, and to any other tobacco products that the 
     Secretary by regulation deems to be subject to this chapter.
       ``(c) Scope.--
       ``(1) In general.--Nothing in this chapter, or any policy 
     issued or regulation promulgated thereunder, or the Family 
     Smoking Prevention and Tobacco Control Act, shall be 
     construed to affect the Secretary's authority over, or the 
     regulation of, products under this Act that are not tobacco 
     products under chapter V or any other chapter.
       ``(2) Limitation of authority.--
       ``(A) In general.--The provisions of this chapter shall not 
     apply to tobacco leaf that is not in the possession of a 
     manufacturer of tobacco products, or to the producers of 
     tobacco leaf, including tobacco growers, tobacco warehouses, 
     and tobacco grower cooperatives, nor shall any employee of 
     the Food and Drug Administration have any authority to enter 
     onto a farm owned by a producer of tobacco leaf without the 
     written consent of such producer.
       ``(B) Exception.--Notwithstanding any other provision of 
     this subparagraph, if a producer of tobacco leaf is also a 
     tobacco product manufacturer or controlled by a tobacco 
     product manufacturer, the producer shall be subject to this 
     chapter in the producer's capacity as a manufacturer.
       ``(C) Rule of construction.--Nothing in this chapter shall 
     be construed to grant the Secretary authority to promulgate 
     regulations on any matter that involves the production of 
     tobacco leaf or a producer thereof, other than activities by 
     a manufacturer affecting production.

     ``SEC. 902. ADULTERATED TOBACCO PRODUCTS.

       ``A tobacco product shall be deemed to be adulterated if--
       ``(1) it consists in whole or in part of any filthy, 
     putrid, or decomposed substance, or is otherwise contaminated 
     by any added poisonous or added deleterious substance that 
     may render the product injurious to health;
       ``(2) it has been prepared, packed, or held under 
     insanitary conditions whereby it may have been contaminated 
     with filth, or whereby it may have been rendered injurious to 
     health;
       ``(3) its package is composed, in whole or in part, of any 
     poisonous or deleterious substance which may render the 
     contents injurious to health;
       ``(4) it is, or purports to be or is represented as, a 
     tobacco product which is subject to a tobacco product 
     standard established under section 907 unless such tobacco 
     product is in all respects in conformity with such standard;
       ``(5)(A) it is required by section 910(a) to have premarket 
     approval and does not have an approved application in effect;
       ``(B) it is in violation of the order approving such an 
     application; or
       ``(6) the methods used in, or the facilities or controls 
     used for, its manufacture, packing or storage are not in 
     conformity with applicable requirements under section 
     906(e)(1)

[[Page 10531]]

     or an applicable condition prescribed by an order under 
     section 906(e)(2); or
       ``(7) it is in violation of section 911.

     ``SEC. 903. MISBRANDED TOBACCO PRODUCTS.

       ``(a) In General.--A tobacco product shall be deemed to be 
     misbranded--
       ``(1) if its labeling is false or misleading in any 
     particular;
       ``(2) if in package form unless it bears a label 
     containing--
       ``(A) the name and place of business of the tobacco product 
     manufacturer, packer, or distributor;
       ``(B) an accurate statement of the quantity of the contents 
     in terms of weight, measure, or numerical count;
       ``(C) an accurate statement of the percentage of the 
     tobacco used in the product that is domestically grown 
     tobacco and the percentage that is foreign grown tobacco; and
       ``(D) the statement required under section 921(a),
     except that under subparagraph (B) reasonable variations 
     shall be permitted, and exemptions as to small packages shall 
     be established, by regulations prescribed by the Secretary;
       ``(3) if any word, statement, or other information required 
     by or under authority of this chapter to appear on the label 
     or labeling is not prominently placed thereon with such 
     conspicuousness (as compared with other words, statements or 
     designs in the labeling) and in such terms as to render it 
     likely to be read and understood by the ordinary individual 
     under customary conditions of purchase and use;
       ``(4) if it has an established name, unless its label 
     bears, to the exclusion of any other nonproprietary name, its 
     established name prominently printed in type as required by 
     the Secretary by regulation;
       ``(5) if the Secretary has issued regulations requiring 
     that its labeling bear adequate directions for use, or 
     adequate warnings against use by children, that are necessary 
     for the protection of users unless its labeling conforms in 
     all respects to such regulations;
       ``(6) if it was manufactured, prepared, propagated, 
     compounded, or processed in any State in an establishment not 
     duly registered under section 905(b), 905(c), 905(d), or 
     905(h), if it was not included in a list required by section 
     905(i), if a notice or other information respecting it was 
     not provided as required by such section or section 905(j), 
     or if it does not bear such symbols from the uniform system 
     for identification of tobacco products prescribed under 
     section 905(e) as the Secretary by regulation requires;
       ``(7) if, in the case of any tobacco product distributed or 
     offered for sale in any State--
       ``(A) its advertising is false or misleading in any 
     particular; or
       ``(B) it is sold or distributed in violation of regulations 
     prescribed under section 906(d);
       ``(8) unless, in the case of any tobacco product 
     distributed or offered for sale in any State, the 
     manufacturer, packer, or distributor thereof includes in all 
     advertisements and other descriptive printed matter issued or 
     caused to be issued by the manufacturer, packer, or 
     distributor with respect to that tobacco product--
       ``(A) a true statement of the tobacco product's established 
     name as described in paragraph (4), printed prominently; and
       ``(B) a brief statement of--
       ``(i) the uses of the tobacco product and relevant 
     warnings, precautions, side effects, and contraindications; 
     and
       ``(ii) in the case of specific tobacco products made 
     subject to a finding by the Secretary after notice and 
     opportunity for comment that such action is appropriate to 
     protect the public health, a full description of the 
     components of such tobacco product or the formula showing 
     quantitatively each ingredient of such tobacco product to the 
     extent required in regulations which shall be issued by the 
     Secretary after an opportunity for a hearing;
       ``(9) if it is a tobacco product subject to a tobacco 
     product standard established under section 907, unless it 
     bears such labeling as may be prescribed in such tobacco 
     product standard; or
       ``(10) if there was a failure or refusal--
       ``(A) to comply with any requirement prescribed under 
     section 904 or 908; or
       ``(B) to furnish any material or information required under 
     section 909.
       ``(b) Prior Approval of Label Statements.--The Secretary 
     may, by regulation, require prior approval of statements made 
     on the label of a tobacco product. No regulation issued under 
     this subsection may require prior approval by the Secretary 
     of the content of any advertisement, except for modified risk 
     tobacco products as provided in section 911. No advertisement 
     of a tobacco product published after the date of enactment of 
     the Family Smoking Prevention and Tobacco Control Act shall, 
     with respect to the language of label statements as 
     prescribed under section 4 of the Cigarette Labeling and 
     Advertising Act and section 3 of the Comprehensive Smokeless 
     Tobacco Health Education Act of 1986 or the regulations 
     issued under such sections, be subject to the provisions of 
     sections 12 through 15 of the Federal Trade Commission Act 
     (15 U.S.C. 52 through 55).

     ``SEC. 904. SUBMISSION OF HEALTH INFORMATION TO THE 
                   SECRETARY.

       ``(a) Requirement.--Not later than 6 months after the date 
     of enactment of the Family Smoking Prevention and Tobacco 
     Control Act, each tobacco product manufacturer or importer, 
     or agents thereof, shall submit to the Secretary the 
     following information:
       ``(1) A listing of all ingredients, including tobacco, 
     substances, compounds, and additives that are, as of such 
     date, added by the manufacturer to the tobacco, paper, 
     filter, or other part of each tobacco product by brand and by 
     quantity in each brand and subbrand.
       ``(2) A description of the content, delivery, and form of 
     nicotine in each tobacco product measured in milligrams of 
     nicotine in accordance with regulations promulgated by the 
     Secretary in accordance with section 4(a)(4) of the Federal 
     Cigarette Labeling and Advertising Act.
       ``(3) A listing of all constituents, including smoke 
     constituents as applicable, identified by the Secretary as 
     harmful or potentially harmful to health in each tobacco 
     product, and as applicable in the smoke of each tobacco 
     product, by brand and by quantity in each brand and subbrand. 
     Effective beginning 2 years after the date of enactment of 
     this chapter, the manufacturer, importer, or agent shall 
     comply with regulations promulgated under section 915 in 
     reporting information under this paragraph, where applicable.
       ``(4) All documents developed after the date of enactment 
     of the Family Smoking Prevention and Tobacco Control Act that 
     relate to health, toxicological, behavioral, or physiologic 
     effects of current or future tobacco products, their 
     constituents (including smoke constituents), ingredients, 
     components, and additives.
       ``(b) Data Submission.--At the request of the Secretary, 
     each tobacco product manufacturer or importer of tobacco 
     products, or agents thereof, shall submit the following:
       ``(1) Any or all documents (including underlying scientific 
     information) relating to research activities, and research 
     findings, conducted, supported, or possessed by the 
     manufacturer (or agents thereof) on the health, 
     toxicological, behavioral, or physiologic effects of tobacco 
     products and their constituents (including smoke 
     constituents), ingredients, components, and additives.
       ``(2) Any or all documents (including underlying scientific 
     information) relating to research activities, and research 
     findings, conducted, supported, or possessed by the 
     manufacturer (or agents thereof) that relate to the issue of 
     whether a reduction in risk to health from tobacco products 
     can occur upon the employment of technology available or 
     known to the manufacturer.
       ``(3) Any or all documents (including underlying scientific 
     or financial information) relating to marketing research 
     involving the use of tobacco products or marketing practices 
     and the effectiveness of such practices used by tobacco 
     manufacturers and distributors.
     An importer of a tobacco product not manufactured in the 
     United States shall supply the information required of a 
     tobacco product manufacturer under this subsection.
       ``(c) Time for Submission.--
       ``(1) In general.--At least 90 days prior to the delivery 
     for introduction into interstate commerce of a tobacco 
     product not on the market on the date of enactment of the 
     Family Smoking Prevention and Tobacco Control Act, the 
     manufacturer of such product shall provide the information 
     required under subsection (a).
       ``(2) Disclosure of additive.--If at any time a tobacco 
     product manufacturer adds to its tobacco products a new 
     tobacco additive or increases the quantity of an existing 
     tobacco additive, the manufacturer shall, except as provided 
     in paragraph (3), at least 90 days prior to such action so 
     advise the Secretary in writing.
       ``(3) Disclosure of other actions.--If at any time a 
     tobacco product manufacturer eliminates or decreases an 
     existing additive, or adds or increases an additive that has 
     by regulation been designated by the Secretary as an additive 
     that is not a human or animal carcinogen, or otherwise 
     harmful to health under intended conditions of use, the 
     manufacturer shall within 60 days of such action so advise 
     the Secretary in writing.
       ``(d) Data List.--
       ``(1) In general.--Not later than 3 years after the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act, and annually thereafter, the Secretary shall 
     publish in a format that is understandable and not misleading 
     to a lay person, and place on public display (in a manner 
     determined by the Secretary) the list established under 
     subsection (e).
       ``(2) Consumer research.--The Secretary shall conduct 
     periodic consumer research to ensure that the list published 
     under paragraph (1) is not misleading to lay persons. Not 
     later than 5 years after the date of enactment of the Family 
     Smoking Prevention and Tobacco Control Act, the Secretary 
     shall submit to the appropriate committees of Congress a 
     report on the results of such research, together with 
     recommendations on whether such publication should be 
     continued or modified.
       ``(e) Data Collection.--Not later than 12 months after the 
     date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act, the Secretary shall establish a list of 
     harmful and potentially harmful constituents, including smoke 
     constituents, to

[[Page 10532]]

     health in each tobacco product by brand and by quantity in 
     each brand and subbrand. The Secretary shall publish a public 
     notice requesting the submission by interested persons of 
     scientific and other information concerning the harmful and 
     potentially harmful constituents in tobacco products and 
     tobacco smoke.

     ``SEC. 905. ANNUAL REGISTRATION.

       ``(a) Definitions.--In this section:
       ``(1) Manufacture, preparation, com-
     pounding, or processing.--The term `manufacture, preparation, 
     compounding, or processing' shall include repackaging or 
     otherwise changing the container, wrapper, or labeling of any 
     tobacco product package in furtherance of the distribution of 
     the tobacco product from the original place of manufacture to 
     the person who makes final delivery or sale to the ultimate 
     consumer or user.
       ``(2) Name.--The term `name' shall include in the case of a 
     partnership the name of each partner and, in the case of a 
     corporation, the name of each corporate officer and director, 
     and the State of incorporation.
       ``(b) Registration by Owners and Operators.--On or before 
     December 31 of each year every person who owns or operates 
     any establishment in any State engaged in the manufacture, 
     preparation, compounding, or processing of a tobacco product 
     or tobacco products shall register with the Secretary the 
     name, places of business, and all such establishments of that 
     person.
       ``(c) Registration of New Owners and Operators.--Every 
     person upon first engaging in the manufacture, preparation, 
     com-
     pounding, or processing of a tobacco product or tobacco 
     products in any establishment owned or operated in any State 
     by that person shall immediately register with the Secretary 
     that person's name, place of business, and such 
     establishment.
       ``(d) Registration of Added Establishments.--Every person 
     required to register under subsection (b) or (c) shall 
     immediately register with the Secretary any additional 
     establishment which that person owns or operates in any State 
     and in which that person begins the manufacture, preparation, 
     compounding, or processing of a tobacco product or tobacco 
     products.
       ``(e) Uniform Product Identification System.--The Secretary 
     may by regulation prescribe a uniform system for the 
     identification of tobacco products and may require that 
     persons who are required to list such tobacco products under 
     subsection (i) shall list such tobacco products in accordance 
     with such system.
       ``(f) Public Access to Registration Information.--The 
     Secretary shall make available for inspection, to any person 
     so requesting, any registration filed under this section.
       ``(g) Biennial Inspection of Registered Establishments.--
     Every establishment in any State registered with the 
     Secretary under this section shall be subject to inspection 
     under section 704, and every such establishment engaged in 
     the manufacture, compounding, or processing of a tobacco 
     product or tobacco products shall be so inspected by 1 or 
     more officers or employees duly designated by the Secretary 
     at least once in the 2-year period beginning with the date of 
     registration of such establishment under this section and at 
     least once in every successive 2-year period thereafter.
       ``(h) Foreign Establishments Shall Register.--Any 
     establishment within any foreign country engaged in the 
     manufacture, preparation, compounding, or processing of a 
     tobacco product or tobacco products, shall register under 
     this section under regulations promulgated by the Secretary. 
     Such regulations shall require such establishment to provide 
     the information required by subsection (i) of this section 
     and shall include provisions for registration of any such 
     establishment upon condition that adequate and effective 
     means are available, by arrangement with the government of 
     such foreign country or otherwise, to enable the Secretary to 
     determine from time to time whether tobacco products 
     manufactured, prepared, compounded, or processed in such 
     establishment, if imported or offered for import into the 
     United States, shall be refused admission on any of the 
     grounds set forth in section 801(a).
       ``(i) Registration Information.--
       ``(1) Product list.--Every person who registers with the 
     Secretary under subsection (b), (c), (d), or (h) shall, at 
     the time of registration under any such subsection, file with 
     the Secretary a list of all tobacco products which are being 
     manufactured, prepared, compounded, or processed by that 
     person for commercial distribution and which has not been 
     included in any list of tobacco products filed by that person 
     with the Secretary under this paragraph or paragraph (2) 
     before such time of registration. Such list shall be prepared 
     in such form and manner as the Secretary may prescribe and 
     shall be accompanied by--
       ``(A) in the case of a tobacco product contained in the 
     applicable list with respect to which a tobacco product 
     standard has been established under section 907 or which is 
     subject to section 910, a reference to the authority for the 
     marketing of such tobacco product and a copy of all labeling 
     for such tobacco product;
       ``(B) in the case of any other tobacco product contained in 
     an applicable list, a copy of all consumer information and 
     other labeling for such tobacco product, a representative 
     sampling of advertisements for such tobacco product, and, 
     upon request made by the Secretary for good cause, a copy of 
     all advertisements for a particular tobacco product; and
       ``(C) if the registrant filing a list has determined that a 
     tobacco product contained in such list is not subject to a 
     tobacco product standard established under section 907, a 
     brief statement of the basis upon which the registrant made 
     such determination if the Secretary requests such a statement 
     with respect to that particular tobacco product.
       ``(2) Biannual report of any change in product list.--Each 
     person who registers with the Secretary under this section 
     shall report to the Secretary once during the month of June 
     of each year and once during the month of December of each 
     year the following:
       ``(A) A list of each tobacco product introduced by the 
     registrant for commercial distribution which has not been 
     included in any list previously filed by that person with the 
     Secretary under this subparagraph or paragraph (1). A list 
     under this subparagraph shall list a tobacco product by its 
     established name and shall be accompanied by the other 
     information required by paragraph (1).
       ``(B) If since the date the registrant last made a report 
     under this paragraph that person has discontinued the 
     manufacture, preparation, compounding, or processing for 
     commercial distribution of a tobacco product included in a 
     list filed under subparagraph (A) or paragraph (1), notice of 
     such discontinuance, the date of such discontinuance, and the 
     identity of its established name.
       ``(C) If since the date the registrant reported under 
     subparagraph (B) a notice of discontinuance that person has 
     resumed the manufacture, preparation, compounding, or 
     processing for commercial distribution of the tobacco product 
     with respect to which such notice of discontinuance was 
     reported, notice of such resumption, the date of such 
     resumption, the identity of such tobacco product by 
     established name, and other information required by paragraph 
     (1), unless the registrant has previously reported such 
     resumption to the Secretary under this subparagraph.
       ``(D) Any material change in any information previously 
     submitted under this paragraph or paragraph (1).
       ``(j) Report Preceding Introduction of Certain 
     Substantially-Equivalent Products Into Interstate Commerce.--
       ``(1) In general.--Each person who is required to register 
     under this section and who proposes to begin the introduction 
     or delivery for introduction into interstate commerce for 
     commercial distribution of a tobacco product intended for 
     human use that was not commercially marketed (other than for 
     test marketing) in the United States as of June 1, 2003, 
     shall, at least 90 days prior to making such introduction or 
     delivery, report to the Secretary (in such form and manner as 
     the Secretary shall prescribe)--
       ``(A) the basis for such person's determination that the 
     tobacco product is substantially equivalent, within the 
     meaning of section 910, to a tobacco product commercially 
     marketed (other than for test marketing) in the United States 
     as of June 1, 2003, that is in compliance with the 
     requirements of this Act; and
       ``(B) action taken by such person to comply with the 
     requirements under section 907 that are applicable to the 
     tobacco product.
       ``(2) Application to certain post june 1, 2003 products.--A 
     report under this subsection for a tobacco product that was 
     first introduced or delivered for introduction into 
     interstate commerce for commercial distribution in the United 
     States after June 1, 2003, and prior to the date that is 15 
     months after the date of enactment of the Family Smoking 
     Prevention and Tobacco Control Act shall be submitted to the 
     Secretary not later than 15 months after such date of 
     enactment.
       ``(3) Exemptions.--
       ``(A) In general.--The Secretary may by regulation, exempt 
     from the requirements of this subsection tobacco products 
     that are modified by adding or deleting a tobacco additive, 
     or increasing or decreasing the quantity of an existing 
     tobacco additive, if the Secretary determines that--
       ``(i) such modification would be a minor modification of a 
     tobacco product authorized for sale under this Act;
       ``(ii) a report under this subsection is not necessary to 
     ensure that permitting the tobacco product to be marketed 
     would be appropriate for protection of the public health; and
       ``(iii) an exemption is otherwise appropriate.
       ``(B) Regulations.--Not later than 9 months after the date 
     of enactment of the Family Smoking Prevention and Tobacco 
     Control Act, the Secretary shall issue regulations to 
     implement this paragraph.

     ``SEC. 906. GENERAL PROVISIONS RESPECTING CONTROL OF TOBACCO 
                   PRODUCTS.

       ``(a) In General.--Any requirement established by or under 
     section 902, 903, 905, or 909 applicable to a tobacco product 
     shall apply to such tobacco product until the applicability 
     of the requirement to the tobacco product has been changed by 
     action taken

[[Page 10533]]

     under section 907, section 910, section 911, or subsection 
     (d) of this section, and any requirement established by or 
     under section 902, 903, 905, or 909 which is inconsistent 
     with a requirement imposed on such tobacco product under 
     section 907, section 910, section 911, or subsection (d) of 
     this section shall not apply to such tobacco product.
       ``(b) Information on Public Access and Comment.--Each 
     notice of proposed rulemaking under section 907, 908, 909, 
     910, or 911 or under this section, any other notice which is 
     published in the Federal Register with respect to any other 
     action taken under any such section and which states the 
     reasons for such action, and each publication of findings 
     required to be made in connection with rulemaking under any 
     such section shall set forth--
       ``(1) the manner in which interested persons may examine 
     data and other information on which the notice or findings is 
     based; and
       ``(2) the period within which interested persons may 
     present their comments on the notice or findings (including 
     the need therefore) orally or in writing, which period shall 
     be at least 60 days but may not exceed 90 days unless the 
     time is extended by the Secretary by a notice published in 
     the Federal Register stating good cause therefore.
       ``(c) Limited Confidentiality of Information.--Any 
     information reported to or otherwise obtained by the 
     Secretary or the Secretary's representative under section 
     903, 904, 907, 908, 909, 910, 911, or 704, or under 
     subsection (e) or (f) of this section, which is exempt from 
     disclosure under subsection (a) of section 552 of title 5, 
     United States Code, by reason of subsection (b)(4) of that 
     section shall be considered confidential and shall not be 
     disclosed, except that the information may be disclosed to 
     other officers or employees concerned with carrying out this 
     chapter, or when relevant in any proceeding under this 
     chapter.
       ``(d) Restrictions.--
       ``(1) In general.--The Secretary may by regulation require 
     restrictions on the sale and distribution of a tobacco 
     product, including restrictions on the access to, and the 
     advertising and promotion of, the tobacco product, if the 
     Secretary determines that such regulation would be 
     appropriate for the protection of the public health. The 
     Secretary may by regulation impose restrictions on the 
     advertising and promotion of a tobacco product consistent 
     with and to full extent permitted by the first amendment to 
     the Constitution. The finding as to whether such regulation 
     would be appropriate for the protection of the public health 
     shall be determined with respect to the risks and benefits to 
     the population as a whole, including users and non-users of 
     the tobacco product, and taking into account--
       ``(A) the increased or decreased likelihood that existing 
     users of tobacco products will stop using such products; and
       ``(B) the increased or decreased likelihood that those who 
     do not use tobacco products will start using such products.
     No such regulation may require that the sale or distribution 
     of a tobacco product be limited to the written or oral 
     authorization of a practitioner licensed by law to prescribe 
     medical products.
       ``(2) Label statements.--The label of a tobacco product 
     shall bear such appropriate statements of the restrictions 
     required by a regulation under subsection (a) as the 
     Secretary may in such regulation prescribe.
       ``(3) Limitations.--
       ``(A) In general.--No restrictions under paragraph (1) 
     may--
       ``(i) prohibit the sale of any tobacco product in face-to-
     face transactions by a specific category of retail outlets; 
     or
       ``(ii) establish a minimum age of sale of tobacco products 
     to any person older than 18 years of age.
       ``(B) Matchbooks.--For purposes of any regulations issued 
     by the Secretary, matchbooks of conventional size containing 
     not more than 20 paper matches, and which are customarily 
     given away for free with the purchase of tobacco products 
     shall be considered as adult written publications which shall 
     be permitted to contain advertising. Notwithstanding the 
     preceding sentence, if the Secretary finds that such 
     treatment of matchbooks is not appropriate for the protection 
     of the public health, the Secretary may determine by 
     regulation that matchbooks shall not be considered adult 
     written publications.
       ``(e) Good Manufacturing Practice Requirements.--
       ``(1) Methods, facilities, and controls to conform.--
       ``(A) In general.--The Secretary may, in accordance with 
     subparagraph (B), prescribe regulations (which may differ 
     based on the type of tobacco product involved) requiring that 
     the methods used in, and the facilities and controls used 
     for, the manufacture, pre-production design validation 
     (including a process to assess the performance of a tobacco 
     product), packing and storage of a tobacco product, conform 
     to current good manufacturing practice, as prescribed in such 
     regulations, to assure that the public health is protected 
     and that the tobacco product is in compliance with this 
     chapter. Good manufacturing practices may include the testing 
     of raw tobacco for pesticide chemical residues regardless of 
     whether a tolerance for such chemical residues has been 
     established.
       ``(B) Requirements.--The Secretary shall--
       ``(i) before promulgating any regulation under subparagraph 
     (A), afford the Tobacco Products Scientific Advisory 
     Committee an opportunity to submit recommendations with 
     respect to the regulation proposed to be promulgated;
       ``(ii) before promulgating any regulation under 
     subparagraph (A), afford opportunity for an oral hearing;
       ``(iii) provide the advisory committee a reasonable time to 
     make its recommendation with respect to proposed regulations 
     under subparagraph (A); and
       ``(iv) in establishing the effective date of a regulation 
     promulgated under this subsection, take into account the 
     differences in the manner in which the different types of 
     tobacco products have historically been produced, the 
     financial resources of the different tobacco product 
     manufacturers, and the state of their existing manufacturing 
     facilities, and shall provide for a reasonable period of time 
     for such manufacturers to conform to good manufacturing 
     practices.
       ``(2) Exemptions; variances.--
       ``(A) Petition.--Any person subject to any requirement 
     prescribed under paragraph (1) may petition the Secretary for 
     a permanent or temporary exemption or variance from such 
     requirement. Such a petition shall be submitted to the 
     Secretary in such form and manner as the Secretary shall 
     prescribe and shall--
       ``(i) in the case of a petition for an exemption from a 
     requirement, set forth the basis for the petitioner's 
     determination that compliance with the requirement is not 
     required to assure that the tobacco product will be in 
     compliance with this chapter;
       ``(ii) in the case of a petition for a variance from a 
     requirement, set forth the methods proposed to be used in, 
     and the facilities and controls proposed to be used for, the 
     manufacture, packing, and storage of the tobacco product in 
     lieu of the methods, facilities, and controls prescribed by 
     the requirement; and
       ``(iii) contain such other information as the Secretary 
     shall prescribe.
       ``(B) Referral to the tobacco products scientific advisory 
     committee.--The Secretary may refer to the Tobacco Products 
     Scientific Advisory Committee any petition submitted under 
     subparagraph (A). The Tobacco Products Scientific Advisory 
     Committee shall report its recommendations to the Secretary 
     with respect to a petition referred to it within 60 days 
     after the date of the petition's referral. Within 60 days 
     after--
       ``(i) the date the petition was submitted to the Secretary 
     under subparagraph (A); or
       ``(ii) the day after the petition was referred to the 
     Tobacco Products Scientific Advisory Committee,

     whichever occurs later, the Secretary shall by order either 
     deny the petition or approve it.
       ``(C) Approval.--The Secretary may approve--
       ``(i) a petition for an exemption for a tobacco product 
     from a requirement if the Secretary determines that 
     compliance with such requirement is not required to assure 
     that the tobacco product will be in compliance with this 
     chapter; and
       ``(ii) a petition for a variance for a tobacco product from 
     a requirement if the Secretary determines that the methods to 
     be used in, and the facilities and controls to be used for, 
     the manufacture, packing, and storage of the tobacco product 
     in lieu of the methods, controls, and facilities prescribed 
     by the requirement are sufficient to assure that the tobacco 
     product will be in compliance with this chapter.
       ``(D) Conditions.--An order of the Secretary approving a 
     petition for a variance shall prescribe such conditions 
     respecting the methods used in, and the facilities and 
     controls used for, the manufacture, packing, and storage of 
     the tobacco product to be granted the variance under the 
     petition as may be necessary to assure that the tobacco 
     product will be in compliance with this chapter.
       ``(E) Hearing.--After the issuance of an order under 
     subparagraph (B) respecting a petition, the petitioner shall 
     have an opportunity for an informal hearing on such order.
       ``(3) Compliance.--Compliance with requirements under this 
     subsection shall not be required before the period ending 3 
     years after the date of enactment of the Family Smoking 
     Prevention and Tobacco Control Act.
       ``(f) Research and Development.--The Secretary may enter 
     into contracts for research, testing, and demonstrations 
     respecting tobacco products and may obtain tobacco products 
     for research, testing, and demonstration purposes without 
     regard to section 3324(a) and (b) of title 31, United States 
     Code, and section 5 of title 41, United States Code.

     ``SEC. 907. TOBACCO PRODUCT STANDARDS.

       ``(a) In General.--
       ``(1) Special rule for cigarettes.--A cigarette or any of 
     its component parts (including the tobacco, filter, or paper) 
     shall not contain, as a constituent (including a smoke 
     constituent) or additive, an artificial or natural flavor 
     (other than tobacco or menthol) or an herb or spice, 
     including strawberry, grape, orange, clove, cinnamon, 
     pineapple,

[[Page 10534]]

     vanilla, coconut, licorice, cocoa, chocolate, cherry, or 
     coffee, that is a characterizing flavor of the tobacco 
     product or tobacco smoke. Nothing in this subparagraph shall 
     be construed to limit the Secretary's authority to take 
     action under this section or other sections of this Act 
     applicable to menthol or any artificial or natural flavor, 
     herb, or spice not specified in this paragraph.
       ``(2) Revision of tobacco product standards.--The Secretary 
     may revise the tobacco product standards in paragraph (1) in 
     accordance with subsection (b).
       ``(3) Tobacco product standards.--The Secretary may adopt 
     tobacco product standards in addition to those in paragraph 
     (1) if the Secretary finds that a tobacco product standard is 
     appropriate for the protection of the public health. This 
     finding shall be determined with respect to the risks and 
     benefits to the population as a whole, including users and 
     non-users of the tobacco product, and taking into account--
       ``(A) the increased or decreased likelihood that existing 
     users of tobacco products will stop using such products; and
       ``(B) the increased or decreased likelihood that those who 
     do not use tobacco products will start using such products.
       ``(4) Content of tobacco product standards.--A tobacco 
     product standard established under this section for a tobacco 
     product--
       ``(A) shall include provisions that are appropriate for the 
     protection of the public health, including provisions, where 
     appropriate--
       ``(i) for the reduction of nicotine yields of the product;
       ``(ii) for the reduction or elimination of other 
     constituents, including smoke constituents, or harmful 
     components of the product; or
       ``(iii) relating to any other requirement under (B);
       ``(B) shall, where appropriate for the protection of the 
     public health, include--
       ``(i) provisions respecting the construction, components, 
     ingredients, additives, constituents, including smoke 
     constituents, and properties of the tobacco product;
       ``(ii) provisions for the testing (on a sample basis or, if 
     necessary, on an individual basis) of the tobacco product;
       ``(iii) provisions for the measurement of the tobacco 
     product characteristics of the tobacco product;
       ``(iv) provisions requiring that the results of each or of 
     certain of the tests of the tobacco product required to be 
     made under clause (ii) show that the tobacco product is in 
     conformity with the portions of the standard for which the 
     test or tests were required; and
       ``(v) a provision requiring that the sale and distribution 
     of the tobacco product be restricted but only to the extent 
     that the sale and distribution of a tobacco product may be 
     restricted under a regulation under section 906(d); and
       ``(C) shall, where appropriate, require the use and 
     prescribe the form and content of labeling for the proper use 
     of the tobacco product.
       ``(5) Periodic re-evaluation of tobacco product 
     standards.--The Secretary shall provide for periodic 
     evaluation of tobacco product standards established under 
     this section to determine whether such standards should be 
     changed to reflect new medical, scientific, or other 
     technological data. The Secretary may provide for testing 
     under paragraph (4)(B) by any person.
       ``(6) Involvement of other agencies; informed persons.--In 
     carrying out duties under this section, the Secretary shall 
     endeavor to--
       ``(A) use personnel, facilities, and other technical 
     support available in other Federal agencies;
       ``(B) consult with other Federal agencies concerned with 
     standard-setting and other nationally or internationally 
     recognized standard-setting entities; and
       ``(C) invite appropriate participation, through joint or 
     other conferences, workshops, or other means, by informed 
     persons representative of scientific, professional, industry, 
     agricultural, or consumer organizations who in the 
     Secretary's judgment can make a significant contribution.
       ``(b) Establishment of Standards.--
       ``(1) Notice.--
       ``(A) In general.--The Secretary shall publish in the 
     Federal Register a notice of proposed rulemaking for the 
     establishment, amendment, or revocation of any tobacco 
     product standard.
       ``(B) Requirements of notice.--A notice of proposed 
     rulemaking for the establishment or amendment of a tobacco 
     product standard for a tobacco product shall--
       ``(i) set forth a finding with supporting justification 
     that the tobacco product standard is appropriate for the 
     protection of the public health;
       ``(ii) set forth proposed findings with respect to the risk 
     of illness or injury that the tobacco product standard is 
     intended to reduce or eliminate; and
       ``(iii) invite interested persons to submit an existing 
     tobacco product standard for the tobacco product, including a 
     draft or proposed tobacco product standard, for consideration 
     by the Secretary.
       ``(C) Standard.--Upon a determination by the Secretary that 
     an additive, constituent (including smoke constituent), or 
     other component of the product that is the subject of the 
     proposed tobacco product standard is harmful, it shall be the 
     burden of any party challenging the proposed standard to 
     prove that the proposed standard will not reduce or eliminate 
     the risk of illness or injury.
       ``(D) Finding.--A notice of proposed rulemaking for the 
     revocation of a tobacco product standard shall set forth a 
     finding with supporting justification that the tobacco 
     product standard is no longer appropriate for the protection 
     of the public health.
       ``(E) Consideration by secretary.--The Secretary shall 
     consider all information submitted in connection with a 
     proposed standard, including information concerning the 
     countervailing effects of the tobacco product standard on the 
     health of adolescent tobacco users, adult tobacco users, or 
     non-tobacco users, such as the creation of a significant 
     demand for contraband or other tobacco products that do not 
     meet the requirements of this chapter and the significance of 
     such demand, and shall issue the standard if the Secretary 
     determines that the standard would be appropriate for the 
     protection of the public health.
       ``(F) Comment.--The Secretary shall provide for a comment 
     period of not less than 60 days.
       ``(2) Promulgation.--
       ``(A) In general.--After the expiration of the period for 
     comment on a notice of proposed rulemaking published under 
     paragraph (1) respecting a tobacco product standard and after 
     consideration of such comments and any report from the 
     Tobacco Products Scientific Advisory Committee, the Secretary 
     shall--
       ``(i) promulgate a regulation establishing a tobacco 
     product standard and publish in the Federal Register findings 
     on the matters referred to in paragraph (1); or
       ``(ii) publish a notice terminating the proceeding for the 
     development of the standard together with the reasons for 
     such termination.
       ``(B) Effective date.--A regulation establishing a tobacco 
     product standard shall set forth the date or dates upon which 
     the standard shall take effect, but no such regulation may 
     take effect before 1 year after the date of its publication 
     unless the Secretary determines that an earlier effective 
     date is necessary for the protection of the public health. 
     Such date or dates shall be established so as to minimize, 
     consistent with the public health, economic loss to, and 
     disruption or dislocation of, domestic and international 
     trade.
       ``(3) Power reserved to congress.--Because of the 
     importance of a decision of the Secretary to issue a 
     regulation establishing a tobacco product standard--
       ``(A) banning all cigarettes, all smokeless tobacco 
     products, all little cigars, all cigars other than little 
     cigars, all pipe tobacco, or all roll your own tobacco 
     products; or
       ``(B) requiring the reduction of nicotine yields of a 
     tobacco product to zero,

     Congress expressly reserves to itself such power.
       ``(4) Amendment; revocation.--
       ``(A) Authority.--The Secretary, upon the Secretary's own 
     initiative or upon petition of an interested person may by a 
     regulation, promulgated in accordance with the requirements 
     of paragraphs (1) and (2)(B), amend or revoke a tobacco 
     product standard.
       ``(B) Effective date.--The Secretary may declare a proposed 
     amendment of a tobacco product standard to be effective on 
     and after its publication in the Federal Register and until 
     the effective date of any final action taken on such 
     amendment if the Secretary determines that making it so 
     effective is in the public interest.
       ``(5) Reference to advisory committee.--The Secretary may--
       ``(A) on the Secretary's own initiative, refer a proposed 
     regulation for the establishment, amendment, or revocation of 
     a tobacco product standard; or
       ``(B) upon the request of an interested person which 
     demonstrates good cause for referral and which is made before 
     the expiration of the period for submission of comments on 
     such proposed regulation,

     refer such proposed regulation to the Tobacco Products 
     Scientific Advisory Committee, for a report and 
     recommendation with respect to any matter involved in the 
     proposed regulation which requires the exercise of scientific 
     judgment. If a proposed regulation is referred under this 
     paragraph to the Tobacco Products Scientific Advisory 
     Committee, the Secretary shall provide the advisory committee 
     with the data and information on which such proposed 
     regulation is based. The Tobacco Products Scientific Advisory 
     Committee shall, within 60 days after the referral of a 
     proposed regulation and after independent study of the data 
     and information furnished to it by the Secretary and other 
     data and information before it, submit to the Secretary a 
     report and recommendation respecting such regulation, 
     together with all underlying data and information and a 
     statement of the reason or basis for the recommendation. A 
     copy of such report and recommendation shall be made public 
     by the Secretary.

     ``SEC. 908. NOTIFICATION AND OTHER REMEDIES.

       ``(a) Notification.--If the Secretary determines that--

[[Page 10535]]

       ``(1) a tobacco product which is introduced or delivered 
     for introduction into interstate commerce for commercial 
     distribution presents an unreasonable risk of substantial 
     harm to the public health; and
       ``(2) notification under this subsection is necessary to 
     eliminate the unreasonable risk of such harm and no more 
     practicable means is available under the provisions of this 
     chapter (other than this section) to eliminate such risk,

     the Secretary may issue such order as may be necessary to 
     assure that adequate notification is provided in an 
     appropriate form, by the persons and means best suited under 
     the circumstances involved, to all persons who should 
     properly receive such notification in order to eliminate such 
     risk. The Secretary may order notification by any appropriate 
     means, including public service announcements. Before issuing 
     an order under this subsection, the Secretary shall consult 
     with the persons who are to give notice under the order.
       ``(b) No Exemption From Other Liability.--Compliance with 
     an order issued under this section shall not relieve any 
     person from liability under Federal or State law. In awarding 
     damages for economic loss in an action brought for the 
     enforcement of any such liability, the value to the plaintiff 
     in such action of any remedy provided under such order shall 
     be taken into account.
       ``(c) Recall Authority.--
       ``(1) In general.--If the Secretary finds that there is a 
     reasonable probability that a tobacco product contains a 
     manufacturing or other defect not ordinarily contained in 
     tobacco products on the market that would cause serious, 
     adverse health consequences or death, the Secretary shall 
     issue an order requiring the appropriate person (including 
     the manufacturers, importers, distributors, or retailers of 
     the tobacco product) to immediately cease distribution of 
     such tobacco product. The order shall provide the person 
     subject to the order with an opportunity for an informal 
     hearing, to be held not later than 10 days after the date of 
     the issuance of the order, on the actions required by the 
     order and on whether the order should be amended to require a 
     recall of such tobacco product. If, after providing an 
     opportunity for such a hearing, the Secretary determines that 
     inadequate grounds exist to support the actions required by 
     the order, the Secretary shall vacate the order.
       ``(2) Amendment of order to require recall.--
       ``(A) In general.--If, after providing an opportunity for 
     an informal hearing under paragraph (1), the Secretary 
     determines that the order should be amended to include a 
     recall of the tobacco product with respect to which the order 
     was issued, the Secretary shall, except as provided in 
     subparagraph (B), amend the order to require a recall. The 
     Secretary shall specify a timetable in which the tobacco 
     product recall will occur and shall require periodic reports 
     to the Secretary describing the progress of the recall.
       ``(B) Notice.--An amended order under subparagraph (A)--
       ``(i) shall not include recall of a tobacco product from 
     individuals; and
       ``(ii) shall provide for notice to persons subject to the 
     risks associated with the use of such tobacco product.

     In providing the notice required by clause (ii), the 
     Secretary may use the assistance of retailers and other 
     persons who distributed such tobacco product. If a 
     significant number of such persons cannot be identified, the 
     Secretary shall notify such persons under section 705(b).
       ``(3) Remedy not exclusive.--The remedy provided by this 
     subsection shall be in addition to remedies provided by 
     subsection (a) of this section.

     ``SEC. 909. RECORDS AND REPORTS ON TOBACCO PRODUCTS.

       ``(a) In General.--Every person who is a tobacco product 
     manufacturer or importer of a tobacco product shall establish 
     and maintain such records, make such reports, and provide 
     such information, as the Secretary may by regulation 
     reasonably require to assure that such tobacco product is not 
     adulterated or misbranded and to otherwise protect public 
     health. Regulations prescribed under the preceding sentence--
       ``(1) may require a tobacco product manufacturer or 
     importer to report to the Secretary whenever the manufacturer 
     or importer receives or otherwise becomes aware of 
     information that reasonably suggests that one of its marketed 
     tobacco products may have caused or contributed to a serious 
     unexpected adverse experience associated with the use of the 
     product or any significant increase in the frequency of a 
     serious, expected adverse product experience;
       ``(2) shall require reporting of other significant adverse 
     tobacco product experiences as determined by the Secretary to 
     be necessary to be reported;
       ``(3) shall not impose requirements unduly burdensome to a 
     tobacco product manufacturer or importer, taking into account 
     the cost of complying with such requirements and the need for 
     the protection of the public health and the implementation of 
     this chapter;
       ``(4) when prescribing the procedure for making requests 
     for reports or information, shall require that each request 
     made under such regulations for submission of a report or 
     information to the Secretary state the reason or purpose for 
     such request and identify to the fullest extent practicable 
     such report or information;
       ``(5) when requiring submission of a report or information 
     to the Secretary, shall state the reason or purpose for the 
     submission of such report or information and identify to the 
     fullest extent practicable such report or information; and
       ``(6) may not require that the identity of any patient or 
     user be disclosed in records, reports, or information 
     required under this subsection unless required for the 
     medical welfare of an individual, to determine risks to 
     public health of a tobacco product, or to verify a record, 
     report, or information submitted under this chapter.

     In prescribing regulations under this subsection, the 
     Secretary shall have due regard for the professional ethics 
     of the medical profession and the interests of patients. The 
     prohibitions of paragraph (6) continue to apply to records, 
     reports, and information concerning any individual who has 
     been a patient, irrespective of whether or when he ceases to 
     be a patient.
       ``(b) Reports of Removals and Corrections.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     Secretary shall by regulation require a tobacco product 
     manufacturer or importer of a tobacco product to report 
     promptly to the Secretary any corrective action taken or 
     removal from the market of a tobacco product undertaken by 
     such manufacturer or importer if the removal or correction 
     was undertaken--
       ``(A) to reduce a risk to health posed by the tobacco 
     product; or
       ``(B) to remedy a violation of this chapter caused by the 
     tobacco product which may present a risk to health.

     A tobacco product manufacturer or importer of a tobacco 
     product who undertakes a corrective action or removal from 
     the market of a tobacco product which is not required to be 
     reported under this subsection shall keep a record of such 
     correction or removal.
       ``(2) Exception.--No report of the corrective action or 
     removal of a tobacco product may be required under paragraph 
     (1) if a report of the corrective action or removal is 
     required and has been submitted under subsection (a).

     ``SEC. 910. APPLICATION FOR REVIEW OF CERTAIN TOBACCO 
                   PRODUCTS.

       ``(a) In General.--
       ``(1) New tobacco product defined.--For purposes of this 
     section the term `new tobacco product' means--
       ``(A) any tobacco product (including those products in test 
     markets) that was not commercially marketed in the United 
     States as of June 1, 2003; or
       ``(B) any modification (including a change in design, any 
     component, any part, or any constituent, including a smoke 
     constituent, or in the content, delivery or form of nicotine, 
     or any other additive or ingredient) of a tobacco product 
     where the modified product was commercially marketed in the 
     United States after June 1, 2003.
       ``(2) Premarket approval required.--
       ``(A) New products.--Approval under this section of an 
     application for premarket approval for any new tobacco 
     product is required unless--
       ``(i) the manufacturer has submitted a report under section 
     905(j); and
       ``(ii) the Secretary has issued an order that the tobacco 
     product--

       ``(I) is substantially equivalent to a tobacco product 
     commercially marketed (other than for test marketing) in the 
     United States as of June 1, 2003; and
       ``(II)(aa) is in compliance with the requirements of this 
     Act; or
       ``(bb) is exempt from the requirements of section 905(j) 
     pursuant to a regulation issued under section 905(j)(3).

       ``(B) Application to certain post june 1, 2003 products.--
     Subparagraph (A) shall not apply to a tobacco product--
       ``(i) that was first introduced or delivered for 
     introduction into interstate commerce for commercial 
     distribution in the United States after June 1, 2003, and 
     prior to the date that is 15 months after the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act; and
       ``(ii) for which a report was submitted under section 
     905(j) within such 15-month period, until the Secretary 
     issues an order that the tobacco product is not substantially 
     equivalent.
       ``(3) Substantially equivalent defined.--
       ``(A) In general.--In this section and section 905(j), the 
     terms `substantially equivalent' or `substantial equivalence' 
     mean, with respect to the tobacco product being compared to 
     the predicate tobacco product, that the Secretary by order 
     has found that the tobacco product--
       ``(i) has the same characteristics as the predicate tobacco 
     product; or
       ``(ii) has different characteristics and the information 
     submitted contains information, including clinical data if 
     deemed necessary by the Secretary, that demonstrates that it 
     is not appropriate to regulate the product under this section 
     because the product does not raise different questions of 
     public health.
       ``(B) Characteristics.--In subparagraph (A), the term 
     `characteristics' means the materials, ingredients, design, 
     composition, heating source, or other features of a tobacco 
     product.

[[Page 10536]]

       ``(C) Limitation.--A tobacco product may not be found to be 
     substantially equivalent to a predicate tobacco product that 
     has been removed from the market at the initiative of the 
     Secretary or that has been determined by a judicial order to 
     be misbranded or adulterated.
       ``(4) Health information.--
       ``(A) Summary.--As part of a submission under section 
     905(j) respecting a tobacco product, the person required to 
     file a premarket notification under such section shall 
     provide an adequate summary of any health information related 
     to the tobacco product or state that such information will be 
     made available upon request by any person.
       ``(B) Required information.--Any summary under subparagraph 
     (A) respecting a tobacco product shall contain detailed 
     information regarding data concerning adverse health effects 
     and shall be made available to the public by the Secretary 
     within 30 days of the issuance of a determination that such 
     tobacco product is substantially equivalent to another 
     tobacco product.
       ``(b) Application.--
       ``(1) Contents.--An application for premarket approval 
     shall contain--
       ``(A) full reports of all information, published or known 
     to, or which should reasonably be known to, the applicant, 
     concerning investigations which have been made to show the 
     health risks of such tobacco product and whether such tobacco 
     product presents less risk than other tobacco products;
       ``(B) a full statement of the components, ingredients, 
     additives, and properties, and of the principle or principles 
     of operation, of such tobacco product;
       ``(C) a full description of the methods used in, and the 
     facilities and controls used for, the manufacture, 
     processing, and, when relevant, packing and installation of, 
     such tobacco product;
       ``(D) an identifying reference to any tobacco product 
     standard under section 907 which would be applicable to any 
     aspect of such tobacco product, and either adequate 
     information to show that such aspect of such tobacco product 
     fully meets such tobacco product standard or adequate 
     information to justify any deviation from such standard;
       ``(E) such samples of such tobacco product and of 
     components thereof as the Secretary may reasonably require;
       ``(F) specimens of the labeling proposed to be used for 
     such tobacco product; and
       ``(G) such other information relevant to the subject matter 
     of the application as the Secretary may require.
       ``(2) Reference to tobacco products scientific advisory 
     committee.--Upon receipt of an application meeting the 
     requirements set forth in paragraph (1), the Secretary--
       ``(A) may, on the Secretary's own initiative; or
       ``(B) may, upon the request of an applicant,

     refer such application to the Tobacco Products Scientific 
     Advisory Committee for reference and for submission (within 
     such period as the Secretary may establish) of a report and 
     recommendation respecting approval of the application, 
     together with all underlying data and the reasons or basis 
     for the recommendation.
       ``(c) Action on Application.--
       ``(1) Deadline.--
       ``(A) In general.--As promptly as possible, but in no event 
     later than 180 days after the receipt of an application under 
     subsection (b), the Secretary, after considering the report 
     and recommendation submitted under paragraph (2) of such 
     subsection, shall--
       ``(i) issue an order approving the application if the 
     Secretary finds that none of the grounds for denying approval 
     specified in paragraph (2) of this subsection applies; or
       ``(ii) deny approval of the application if the Secretary 
     finds (and sets forth the basis for such finding as part of 
     or accompanying such denial) that 1 or more grounds for 
     denial specified in paragraph (2) of this subsection apply.
       ``(B) Restrictions on sale and distribution.--An order 
     approving an application for a tobacco product may require as 
     a condition to such approval that the sale and distribution 
     of the tobacco product be restricted but only to the extent 
     that the sale and distribution of a tobacco product may be 
     restricted under a regulation under section 906(d).
       ``(2) Denial of approval.--The Secretary shall deny 
     approval of an application for a tobacco product if, upon the 
     basis of the information submitted to the Secretary as part 
     of the application and any other information before the 
     Secretary with respect to such tobacco product, the Secretary 
     finds that--
       ``(A) there is a lack of a showing that permitting such 
     tobacco product to be marketed would be appropriate for the 
     protection of the public health;
       ``(B) the methods used in, or the facilities or controls 
     used for, the manufacture, processing, or packing of such 
     tobacco product do not conform to the requirements of section 
     906(e);
       ``(C) based on a fair evaluation of all material facts, the 
     proposed labeling is false or misleading in any particular; 
     or
       ``(D) such tobacco product is not shown to conform in all 
     respects to a tobacco product standard in effect under 
     section 907, compliance with which is a condition to approval 
     of the application, and there is a lack of adequate 
     information to justify the deviation from such standard.
       ``(3) Denial information.--Any denial of an application 
     shall, insofar as the Secretary determines to be practicable, 
     be accompanied by a statement informing the applicant of the 
     measures required to place such application in approvable 
     form (which measures may include further research by the 
     applicant in accordance with 1 or more protocols prescribed 
     by the Secretary).
       ``(4) Basis for finding.--For purposes of this section, the 
     finding as to whether approval of a tobacco product is 
     appropriate for the protection of the public health shall be 
     determined with respect to the risks and benefits to the 
     population as a whole, including users and nonusers of the 
     tobacco product, and taking into account--
       ``(A) the increased or decreased likelihood that existing 
     users of tobacco products will stop using such products; and
       ``(B) the increased or decreased likelihood that those who 
     do not use tobacco products will start using such products.
       ``(5) Basis for action.--
       ``(A) Investigations.--For purposes of paragraph (2)(A), 
     whether permitting a tobacco product to be marketed would be 
     appropriate for the protection of the public health shall, 
     when appropriate, be determined on the basis of well-
     controlled investigations, which may include 1 or more 
     clinical investigations by experts qualified by training and 
     experience to evaluate the tobacco product.
       ``(B) Other evidence.--If the Secretary determines that 
     there exists valid scientific evidence (other than evidence 
     derived from investigations described in subparagraph (A)) 
     which is sufficient to evaluate the tobacco product the 
     Secretary may authorize that the determination for purposes 
     of paragraph (2)(A) be made on the basis of such evidence.
       ``(d) Withdrawal and Temporary Suspension.--
       ``(1) In general.--The Secretary shall, upon obtaining, 
     where appropriate, advice on scientific matters from an 
     advisory committee, and after due notice and opportunity for 
     informal hearing to the holder of an approved application for 
     a tobacco product, issue an order withdrawing approval of the 
     application if the Secretary finds--
       ``(A) that the continued marketing of such tobacco product 
     no longer is appropriate for the protection of the public 
     health;
       ``(B) that the application contained or was accompanied by 
     an untrue statement of a material fact;
       ``(C) that the applicant--
       ``(i) has failed to establish a system for maintaining 
     records, or has repeatedly or deliberately failed to maintain 
     records or to make reports, required by an applicable 
     regulation under section 909;
       ``(ii) has refused to permit access to, or copying or 
     verification of, such records as required by section 704; or
       ``(iii) has not complied with the requirements of section 
     905;
       ``(D) on the basis of new information before the Secretary 
     with respect to such tobacco product, evaluated together with 
     the evidence before the Secretary when the application was 
     approved, that the methods used in, or the facilities and 
     controls used for, the manufacture, processing, packing, or 
     installation of such tobacco product do not conform with the 
     requirements of section 906(e) and were not brought into 
     conformity with such requirements within a reasonable time 
     after receipt of written notice from the Secretary of 
     nonconformity;
       ``(E) on the basis of new information before the Secretary, 
     evaluated together with the evidence before the Secretary 
     when the application was approved, that the labeling of such 
     tobacco product, based on a fair evaluation of all material 
     facts, is false or misleading in any particular and was not 
     corrected within a reasonable time after receipt of written 
     notice from the Secretary of such fact; or
       ``(F) on the basis of new information before the Secretary, 
     evaluated together with the evidence before the Secretary 
     when the application was approved, that such tobacco product 
     is not shown to conform in all respects to a tobacco product 
     standard which is in effect under section 907, compliance 
     with which was a condition to approval of the application, 
     and that there is a lack of adequate information to justify 
     the deviation from such standard.
       ``(2) Appeal.--The holder of an application subject to an 
     order issued under paragraph (1) withdrawing approval of the 
     application may, by petition filed on or before the 30th day 
     after the date upon which such holder receives notice of such 
     withdrawal, obtain review thereof in accordance with 
     subsection (e).
       ``(3) Temporary suspension.--If, after providing an 
     opportunity for an informal hearing, the Secretary determines 
     there is reasonable probability that the continuation of 
     distribution of a tobacco product under an approved 
     application would cause serious, adverse health consequences 
     or death, that is greater than ordinarily caused by tobacco 
     products on the market, the Secretary shall by order 
     temporarily suspend the approval of the application approved 
     under this section.

[[Page 10537]]

     If the Secretary issues such an order, the Secretary shall 
     proceed expeditiously under paragraph (1) to withdraw such 
     application.
       ``(e) Service of Order.--An order issued by the Secretary 
     under this section shall be served--
       ``(1) in person by any officer or employee of the 
     department designated by the Secretary; or
       ``(2) by mailing the order by registered mail or certified 
     mail addressed to the applicant at the applicant's last known 
     address in the records of the Secretary.
       ``(f) Records.--
       ``(1) Additional information.--In the case of any tobacco 
     product for which an approval of an application filed under 
     subsection (b) is in effect, the applicant shall establish 
     and maintain such records, and make such reports to the 
     Secretary, as the Secretary may by regulation, or by order 
     with respect to such application, prescribe on the basis of a 
     finding that such records and reports are necessary in order 
     to enable the Secretary to determine, or facilitate a 
     determination of, whether there is or may be grounds for 
     withdrawing or temporarily suspending such approval.
       ``(2) Access to records.--Each person required under this 
     section to maintain records, and each person in charge or 
     custody thereof, shall, upon request of an officer or 
     employee designated by the Secretary, permit such officer or 
     employee at all reasonable times to have access to and copy 
     and verify such records.
       ``(g) Investigational Tobacco Product Exemption for 
     Investigational Use.--The Secretary may exempt tobacco 
     products intended for investigational use from the provisions 
     of this chapter under such conditions as the Secretary may by 
     regulation prescribe.

     ``SEC. 911. MODIFIED RISK TOBACCO PRODUCTS.

       ``(a) In General.--No person may introduce or deliver for 
     introduction into interstate commerce any modified risk 
     tobacco product unless approval of an application filed 
     pursuant to subsection (d) is effective with respect to such 
     product.
       ``(b) Definitions.--In this section:
       ``(1) Modified risk tobacco product.--The term `modified 
     risk tobacco product' means any tobacco product that is sold 
     or distributed for use to reduce harm or the risk of tobacco-
     related disease associated with commercially marketed tobacco 
     products.
       ``(2) Sold or distributed.--
       ``(A) In general.--With respect to a tobacco product, the 
     term `sold or distributed for use to reduce harm or the risk 
     of tobacco-related disease associated with commercially 
     marketed tobacco products' means a tobacco product--
       ``(A) the label, labeling, or advertising of which 
     represents explicitly or implicitly that--

       ``(I) the tobacco product presents a lower risk of tobacco-
     related disease or is less harmful than one or more other 
     commercially marketed tobacco products;
       ``(II) the tobacco product or its smoke contains a reduced 
     level of a substance or presents a reduced exposure to a 
     substance; or
       ``(III) the tobacco product or its smoke does not contain 
     or is free of a substance;

       ``(ii) the label, labeling, or advertising of which uses 
     the descriptors `light', `mild', or `low' or similar 
     descriptors; or
       ``(iii) the tobacco product manufacturer of which has taken 
     any action directed to consumers through the media or 
     otherwise, other than by means of the tobacco product's 
     label, labeling or advertising, after the date of enactment 
     of the Family Smoking Prevention and Tobacco Control Act, 
     respecting the product that would be reasonably expected to 
     result in consumers believing that the tobacco product or its 
     smoke may present a lower risk of disease or is less harmful 
     than one or more commercially marketed tobacco products, or 
     presents a reduced exposure to, or does not contain or is 
     free of, a substance or substances.
       ``(B) Limitation.--No tobacco product shall be considered 
     to be `sold or distributed for use to reduce harm or the risk 
     of tobacco-related disease associated with commercially 
     marketed tobacco products', except as described in 
     subparagraph (A).
       ``(c) Tobacco Dependence Products.--A product that is 
     intended to be used for the treatment of tobacco dependence, 
     including smoking cessation, is not a modified risk tobacco 
     product under this section and is subject to the requirements 
     of chapter V.
       ``(d) Filing.--Any person may file with the Secretary an 
     application for a modified risk tobacco product. Such 
     application shall include--
       ``(1) a description of the proposed product and any 
     proposed advertising and labeling;
       ``(2) the conditions for using the product;
       ``(3) the formulation of the product;
       ``(4) sample product labels and labeling;
       ``(5) all documents (including underlying scientific 
     information) relating to research findings conducted, 
     supported, or possessed by the tobacco product manufacturer 
     relating to the effect of the product on tobacco related 
     diseases and health-related conditions, including information 
     both favorable and unfavorable to the ability of the product 
     to reduce risk or exposure and relating to human health;
       ``(6) data and information on how consumers actually use 
     the tobacco product; and
       ``(7) such other information as the Secretary may require.
       ``(e) Public Availability.--The Secretary shall make the 
     application described in subsection (d) publicly available 
     (except matters in the application which are trade secrets or 
     otherwise confidential, commercial information) and shall 
     request comments by interested persons on the information 
     contained in the application and on the label, labeling, and 
     advertising accompanying such application.
       ``(f) Advisory Committee.--
       ``(1) In general.--The Secretary shall refer to an advisory 
     committee any application submitted under this subsection.
       ``(2) Recommendations.--Not later than 60 days after the 
     date an application is referred to an advisory committee 
     under paragraph (1), the advisory committee shall report its 
     recommendations on the application to the Secretary.
       ``(g) Approval.--
       ``(1) Modified risk products.--Except as provided in 
     paragraph (2), the Secretary shall approve an application for 
     a modified risk tobacco product filed under this section only 
     if the Secretary determines that the applicant has 
     demonstrated that such product, as it is actually used by 
     consumers, will--
       ``(A) significantly reduce harm and the risk of tobacco-
     related disease to individual tobacco users; and
       ``(B) benefit the health of the population as a whole 
     taking into account both users of tobacco products and 
     persons who do not currently use tobacco products.
       ``(2) Special rule for certain products.--
       ``(A) In general.--The Secretary may approve an application 
     for a tobacco product that has not been approved as a 
     modified risk tobacco product pursuant to paragraph (1) if 
     the Secretary makes the findings required under this 
     paragraph and determines that the applicant has demonstrated 
     that--
       ``(i) the approval of the application would be appropriate 
     to promote the public health;
       ``(ii) any aspect of the label, labeling, and advertising 
     for such product that would cause the tobacco product to be a 
     modified risk tobacco product under subsection (b)(2) is 
     limited to an explicit or implicit representation that such 
     tobacco product or its smoke contains or is free of a 
     substance or contains a reduced level of a substance, or 
     presents a reduced exposure to a substance in tobacco smoke.
       ``(iii) scientific evidence is not available and, using the 
     best available scientific methods, cannot be made available 
     without conducting long-term epidemiological studies for an 
     application to meet the standards set forth in paragraph (1); 
     and
       ``(iv) the scientific evidence that is available without 
     conducting long-term epidemiological studies demonstrates 
     that a measurable and substantial reduction in morbidity or 
     mortality among individual tobacco users is anticipated in 
     subsequent studies.
       ``(B) Additional findings required.--In order to approve an 
     application under subparagraph (A) the Secretary must also 
     find that the applicant has demonstrated that--
       ``(i) the magnitude of the overall reductions in exposure 
     to the substance or substances which are the subject of the 
     application is substantial, such substance or substances are 
     harmful, and the product as actually used exposes consumers 
     to the specified reduced level of the substance or 
     substances;
       ``(ii) the product as actually used by consumers will not 
     expose them to higher levels of other harmful substances 
     compared to the similar types of tobacco products then on the 
     market unless such increases are minimal and the anticipated 
     overall impact of use of the product remains a substantial 
     and measurable reduction in overall morbidity and mortality 
     among individual tobacco users;
       ``(iii) testing of actual consumer perception shows that, 
     as the applicant proposes to label and market the product, 
     consumers will not be misled into believing that the 
     product--

       ``(I) is or has been demonstrated to be less harmful; or
       ``(II) presents or has been demonstrated to present less of 
     a risk of disease than 1 or more other commercially marketed 
     tobacco products; and

       ``(iv) approval of the application is expected to benefit 
     the health of the population as a whole taking into account 
     both users of tobacco products and persons who do not 
     currently use tobacco products.
       ``(C) Conditions of approval.--
       ``(i) In general.--Applications approved under this 
     paragraph shall be limited to a term of not more than 5 
     years, but may be renewed upon a finding by the Secretary 
     that the requirements of this paragraph continue to be 
     satisfied based on the filing of a new application.
       ``(ii) Agreements by applicant.--Applications approved 
     under this paragraph shall be conditioned on the applicant's 
     agreement to conduct post-market surveillance and studies and 
     to submit to the Secretary the results of such surveillance 
     and studies to determine the impact of the application 
     approval on consumer perception, behavior, and health and to 
     enable the Secretary to review the accuracy of the 
     determinations

[[Page 10538]]

     upon which the approval was based in accordance with a 
     protocol approved by the Secretary.
       ``(iii) Annual submission.--The results of such post-market 
     surveillance and studies described in clause (ii) shall be 
     submitted annually.
       ``(3) Basis.--The determinations under paragraphs (1) and 
     (2) shall be based on--
       ``(A) the scientific evidence submitted by the applicant; 
     and
       ``(B) scientific evidence and other information that is 
     available to the Secretary.
       ``(4) Benefit to health of individuals and of population as 
     a whole.--In making the determinations under paragraphs (1) 
     and (2), the Secretary shall take into account--
       ``(A) the relative health risks to individuals of the 
     tobacco product that is the subject of the application;
       ``(B) the increased or decreased likelihood that existing 
     users of tobacco products who would otherwise stop using such 
     products will switch to the tobacco product that is the 
     subject of the application;
       ``(C) the increased or decreased likelihood that persons 
     who do not use tobacco products will start using the tobacco 
     product that is the subject of the application;
       ``(D) the risks and benefits to persons from the use of the 
     tobacco product that is the subject of the application as 
     compared to the use of products for smoking cessation 
     approved under chapter V to treat nicotine dependence; and
       ``(E) comments, data, and information submitted by 
     interested persons.
       ``(h) Additional Conditions for Approval.--
       ``(1) Modified risk products.--The Secretary shall require 
     for the approval of an application under this section that 
     any advertising or labeling concerning modified risk products 
     enable the public to comprehend the information concerning 
     modified risk and to understand the relative significance of 
     such information in the context of total health and in 
     relation to all of the diseases and health-related conditions 
     associated with the use of tobacco products.
       ``(2) Comparative claims.--
       ``(A) In general.--The Secretary may require for the 
     approval of an application under this subsection that a claim 
     comparing a tobacco product to 1 or more other commercially 
     marketed tobacco products shall compare the tobacco product 
     to a commercially marketed tobacco product that is 
     representative of that type of tobacco product on the market 
     (for example the average value of the top 3 brands of an 
     established regular tobacco product).
       ``(B) Quantitative comparisons.--The Secretary may also 
     require, for purposes of subparagraph (A), that the percent 
     (or fraction) of change and identity of the reference tobacco 
     product and a quantitative comparison of the amount of the 
     substance claimed to be reduced shall be stated in immediate 
     proximity to the most prominent claim.
       ``(3) Label disclosure.--
       ``(A) In general.--The Secretary may require the disclosure 
     on the label of other substances in the tobacco product, or 
     substances that may be produced by the consumption of that 
     tobacco product, that may affect a disease or health-related 
     condition or may increase the risk of other diseases or 
     health-related conditions associated with the use of tobacco 
     products.
       ``(B) Conditions of use.--If the conditions of use of the 
     tobacco product may affect the risk of the product to human 
     health, the Secretary may require the labeling of conditions 
     of use.
       ``(4) Time.--The Secretary shall limit an approval under 
     subsection (g)(1) for a specified period of time.
       ``(5) Advertising.--The Secretary may require that an 
     applicant, whose application has been approved under this 
     subsection, comply with requirements relating to advertising 
     and promotion of the tobacco product.
       ``(i) Postmarket Surveillance and Studies.--
       ``(1) In general.--The Secretary shall require that an 
     applicant under subsection (g)(1) conduct post market 
     surveillance and studies for a tobacco product for which an 
     application has been approved to determine the impact of the 
     application approval on consumer perception, behavior, and 
     health, to enable the Secretary to review the accuracy of the 
     determinations upon which the approval was based, and to 
     provide information that the Secretary determines is 
     otherwise necessary regarding the use or health risks 
     involving the tobacco product. The results of post-market 
     surveillance and studies shall be submitted to the Secretary 
     on an annual basis.
       ``(2) Surveillance protocol.--Each applicant required to 
     conduct a surveillance of a tobacco product under paragraph 
     (1) shall, within 30 days after receiving notice that the 
     applicant is required to conduct such surveillance, submit, 
     for the approval of the Secretary, a protocol for the 
     required surveillance. The Secretary, within 60 days of the 
     receipt of such protocol, shall determine if the principal 
     investigator proposed to be used in the surveillance has 
     sufficient qualifications and experience to conduct such 
     surveillance and if such protocol will result in collection 
     of the data or other information designated by the Secretary 
     as necessary to protect the public health.
       ``(j) Withdrawal of Approval.--The Secretary, after an 
     opportunity for an informal hearing, shall withdraw the 
     approval of an application under this section if the 
     Secretary determines that--
       ``(1) the applicant, based on new information, can no 
     longer make the demonstrations required under subsection (g), 
     or the Secretary can no longer make the determinations 
     required under subsection (g);
       ``(2) the application failed to include material 
     information or included any untrue statement of material 
     fact;
       ``(3) any explicit or implicit representation that the 
     product reduces risk or exposure is no longer valid, 
     including if--
       ``(A) a tobacco product standard is established pursuant to 
     section 907;
       ``(B) an action is taken that affects the risks presented 
     by other commercially marketed tobacco products that were 
     compared to the product that is the subject of the 
     application; or
       ``(C) any postmarket surveillance or studies reveal that 
     the approval of the application is no longer consistent with 
     the protection of the public health;
       ``(4) the applicant failed to conduct or submit the 
     postmarket surveillance and studies required under subsection 
     (g)(2)(C)(ii) or (i); or
       ``(5) the applicant failed to meet a condition imposed 
     under subsection (h).
       ``(k) Chapter IV or V.--A product approved in accordance 
     with this section shall not be subject to chapter IV or V.
       ``(l) Implementing Regulations or Guidance.--
       ``(1) Scientific evidence.--Not later than 2 years after 
     the date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act, the Secretary shall issue regulations or 
     guidance (or any combination thereof) on the scientific 
     evidence required for assessment and ongoing review of 
     modified risk tobacco products. Such regulations or guidance 
     shall--
       ``(A) establish minimum standards for scientific studies 
     needed prior to approval to show that a substantial reduction 
     in morbidity or mortality among individual tobacco users is 
     likely;
       ``(B) include validated biomarkers, intermediate clinical 
     endpoints, and other feasible outcome measures, as 
     appropriate;
       ``(C) establish minimum standards for post market studies, 
     that shall include regular and long-term assessments of 
     health outcomes and mortality, intermediate clinical 
     endpoints, consumer perception of harm reduction, and the 
     impact on quitting behavior and new use of tobacco products, 
     as appropriate;
       ``(D) establish minimum standards for required postmarket 
     surveillance, including ongoing assessments of consumer 
     perception; and
       ``(E) require that data from the required studies and 
     surveillance be made available to the Secretary prior to the 
     decision on renewal of a modified risk tobacco product.
       ``(2) Consultation.--The regulations or guidance issued 
     under paragraph (1) shall be developed in consultation with 
     the Institute of Medicine, and with the input of other 
     appropriate scientific and medical experts, on the design and 
     conduct of such studies and surveillance.
       ``(3) Revision.--The regulations or guidance under 
     paragraph (1) shall be revised on a regular basis as new 
     scientific information becomes available.
       ``(4) New tobacco products.--Not later than 2 years after 
     the date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act, the Secretary shall issue a regulation 
     or guidance that permits the filing of a single application 
     for any tobacco product that is a new tobacco product under 
     section 910 and for which the applicant seeks approval as a 
     modified risk tobacco product under this section.
       ``(m) Distributors.--No distributor may take any action, 
     after the date of enactment of the Family Smoking Prevention 
     and Tobacco Control Act, with respect to a tobacco product 
     that would reasonably be expected to result in consumers 
     believing that the tobacco product or its smoke may present a 
     lower risk of disease or is less harmful than one or more 
     commercially marketed tobacco products, or presents a reduced 
     exposure to, or does not contain or is free of, a substance 
     or substances.

     ``SEC. 912. JUDICIAL REVIEW.

       ``(a) Right To Review.--
       ``(1) In general.--Not later than 30 days after--
       ``(A) the promulgation of a regulation under section 907 
     establishing, amending, or revoking a tobacco product 
     standard; or
       ``(B) a denial of an application for approval under section 
     910(c),

     any person adversely affected by such regulation or denial 
     may file a petition for judicial review of such regulation or 
     denial with the United States Court of Appeals for the 
     District of Columbia or for the circuit in which such person 
     resides or has their principal place of business.
       ``(2) Requirements.--
       ``(A) Copy of petition.--A copy of the petition filed under 
     paragraph (1) shall be transmitted by the clerk of the court 
     involved to the Secretary.

[[Page 10539]]

       ``(B) Record of proceedings.--On receipt of a petition 
     under subparagraph (A), the Secretary shall file in the court 
     in which such petition was filed--
       ``(i) the record of the proceedings on which the regulation 
     or order was based; and
       ``(ii) a statement of the reasons for the issuance of such 
     a regulation or order.
       ``(C) Definition of record.--In this section, the term 
     `record' means--
       ``(i) all notices and other matter published in the Federal 
     Register with respect to the regulation or order reviewed;
       ``(ii) all information submitted to the Secretary with 
     respect to such regulation or order;
       ``(iii) proceedings of any panel or advisory committee with 
     respect to such regulation or order;
       ``(iv) any hearing held with respect to such regulation or 
     order; and
       ``(v) any other information identified by the Secretary, in 
     the administrative proceeding held with respect to such 
     regulation or order, as being relevant to such regulation or 
     order.
       ``(b) Standard of Review.--Upon the filing of the petition 
     under subsection (a) for judicial review of a regulation or 
     order, the court shall have jurisdiction to review the 
     regulation or order in accordance with chapter 7 of title 5, 
     United States Code, and to grant appropriate relief, 
     including interim relief, as provided for in such chapter. A 
     regulation or denial described in subsection (a) shall be 
     reviewed in accordance with section 706(2)(A) of title 5, 
     United States Code.
       ``(c) Finality of Judgment.--The judgment of the court 
     affirming or setting aside, in whole or in part, any 
     regulation or order shall be final, subject to review by the 
     Supreme Court of the United States upon certiorari or 
     certification, as provided in section 1254 of title 28, 
     United States Code.
       ``(d) Other Remedies.--The remedies provided for in this 
     section shall be in addition to, and not in lieu of, any 
     other remedies provided by law.
       ``(e) Regulations and Orders Must Recite Basis in Record.--
     To facilitate judicial review, a regulation or order issued 
     under section 906, 907, 908, 909, 910, or 916 shall contain a 
     statement of the reasons for the issuance of such regulation 
     or order in the record of the proceedings held in connection 
     with its issuance.

     ``SEC. 913. EQUAL TREATMENT OF RETAIL OUTLETS.

       ``The Secretary shall issue regulations to require that 
     retail establishments for which the predominant business is 
     the sale of tobacco products comply with any advertising 
     restrictions applicable to retail establishments accessible 
     to individuals under the age of 18.

     ``SEC. 914. JURISDICTION OF AND COORDINATION WITH THE FEDERAL 
                   TRADE COMMISSION.

       ``(a) Jurisdiction.--
       ``(1) In general.--Except where expressly provided in this 
     chapter, nothing in this chapter shall be construed as 
     limiting or diminishing the authority of the Federal Trade 
     Commission to enforce the laws under its jurisdiction with 
     respect to the advertising, sale, or distribution of tobacco 
     products.
       ``(2) Enforcement.--Any advertising that violates this 
     chapter or a provision of the regulations referred to in 
     section 102 of the Family Smoking Prevention and Tobacco 
     Control Act, is an unfair or deceptive act or practice under 
     section 5(a) of the Federal Trade Commission Act (15 U.S.C. 
     45(a)) and shall be considered a violation of a rule 
     promulgated under section 18 of that Act (15 U.S.C. 57a).
       ``(b) Coordination.--With respect to the requirements of 
     section 4 of the Federal Cigarette Labeling and Advertising 
     Act (15 U.S.C. 1333) and section 3 of the Comprehensive 
     Smokeless Tobacco Health Education Act of 1986 (15 U.S.C. 
     4402)--
       ``(1) the Chairman of the Federal Trade Commission shall 
     coordinate with the Secretary concerning the enforcement of 
     such Act as such enforcement relates to unfair or deceptive 
     acts or practices in the advertising of cigarettes or 
     smokeless tobacco; and
       ``(2) the Secretary shall consult with the Chairman of such 
     Commission in revising the label statements and requirements 
     under such sections.

     ``SEC. 915. CONGRESSIONAL REVIEW PROVISIONS.

       ``In accordance with section 801 of title 5, United States 
     Code, Congress shall review, and may disapprove, any rule 
     under this chapter that is subject to section 801. This 
     section and section 801 do not apply to the regulations 
     referred to in section 102 of the Family Smoking Prevention 
     and Tobacco Control Act.

     ``SEC. 916. REGULATION REQUIREMENT.

       ``(a) Testing, Reporting, and Disclosure.--Not later than 
     24 months after the date of enactment of the Family Smoking 
     Prevention and Tobacco Control Act, the Secretary, acting 
     through the Commissioner of the Food and Drug Administration, 
     shall promulgate regulations under this Act that meet the 
     requirements of subsection (b).
       ``(b) Contents of Rules.--The regulations promulgated under 
     subsection (a) shall require testing and reporting of tobacco 
     product constituents, ingredients, and additives, including 
     smoke constituents, by brand and sub-brand that the Secretary 
     determines should be tested to protect the public health. The 
     regulations may require that tobacco product manufacturers, 
     packagers, or importers make disclosures relating to the 
     results of the testing of tar and nicotine through labels or 
     advertising or other appropriate means, and make disclosures 
     regarding the results of the testing of other constituents, 
     including smoke constituents, ingredients, or additives, that 
     the Secretary determines should be disclosed to the public to 
     protect the public health and will not mislead consumers 
     about the risk of tobacco related disease.
       ``(c) Authority.--The Food and Drug Administration shall 
     have the authority under this chapter to conduct or to 
     require the testing, reporting, or disclosure of tobacco 
     product constituents, including smoke constituents.

     ``SEC. 917. PRESERVATION OF STATE AND LOCAL AUTHORITY.

       ``(a) In General.--
       ``(1) Preservation.--Nothing in this chapter, or rules 
     promulgated under this chapter, shall be construed to limit 
     the authority of a Federal agency (including the Armed 
     Forces), a State or political subdivision of a State, or the 
     government of an Indian tribe to enact, adopt, promulgate, 
     and enforce any law, rule, regulation, or other measure with 
     respect to tobacco products that is in addition to, or more 
     stringent than, requirements established under this chapter, 
     including a law, rule, regulation, or other measure relating 
     to or prohibiting the sale, distribution, possession, 
     exposure to, access to, advertising and promotion of, or use 
     of tobacco products by individuals of any age, information 
     reporting to the State, or measures relating to fire safety 
     standards for tobacco products. No provision of this chapter 
     shall limit or otherwise affect any State, Tribal, or local 
     taxation of tobacco products.
       ``(2) Preemption of certain state and local requirements.--
       ``(A) In general.--Except as provided in paragraph (1) and 
     subparagraph (B), no State or political subdivision of a 
     State may establish or continue in effect with respect to a 
     tobacco product any requirement which is different from, or 
     in addition to, any requirement under the provisions of this 
     chapter relating to tobacco product standards, premarket 
     approval, adulteration, misbranding, labeling, registration, 
     good manufacturing standards, or reduced risk products.
       ``(B) Exception.--Subparagraph (A) does not apply to 
     requirements relating to the sale, distribution, possession, 
     information reporting to the State, exposure to, access to, 
     the advertising and promotion of, or use of, tobacco products 
     by individuals of any age, or relating to fire safety 
     standards for tobacco products. Information disclosed to a 
     State under subparagraph (A) that is exempt from disclosure 
     under section 554(b)(4) of title 5, United States Code, shall 
     be treated as trade secret and confidential information by 
     the State.
       ``(b) Rule of Construction Regarding Product Liability.--No 
     provision of this chapter relating to a tobacco product shall 
     be construed to modify or otherwise affect any action or the 
     liability of any person under the product liability law of 
     any State.

     ``SEC. 918. TOBACCO PRODUCTS SCIENTIFIC ADVISORY COMMITTEE.

       ``(a) Establishment.--Not later than 1 year after the date 
     of enactment of the Family Smoking Prevention and Tobacco 
     Control Act, the Secretary shall establish a 11-member 
     advisory committee, to be known as the `Tobacco Products 
     Scientific Advisory Committee'.
       ``(b) Membership.--
       ``(1) In general.--
       ``(A) Members.--The Secretary shall appoint as members of 
     the Tobacco Products Scientific Advisory Committee 
     individuals who are technically qualified by training and 
     experience in the medicine, medical ethics, science, or 
     technology involving the manufacture, evaluation, or use of 
     tobacco products, who are of appropriately diversified 
     professional backgrounds. The committee shall be composed 
     of--
       ``(i) 7 individuals who are physicians, dentists, 
     scientists, or health care professionals practicing in the 
     area of oncology, pulmonology, cardiology, toxicology, 
     pharmacology, addiction, or any other relevant specialty;
       ``(ii) 1 individual who is an officer or employee of a 
     State or local government or of the Federal Government;
       ``(iii) 1 individual as a representative of the general 
     public;
       ``(iv) 1 individual as a representative of the interests in 
     the tobacco manufacturing industry; and
       ``(v) 1 individual as a representative of the interests of 
     the tobacco growers.
       ``(B) Nonvoting members.--The members of the committee 
     appointed under clauses (iv) and (v) of subparagraph (A) 
     shall serve as consultants to those described in clauses (i) 
     through (iii) of subparagraph (A) and shall be nonvoting 
     representatives.
       ``(2) Limitation.--The Secretary may not appoint to the 
     Advisory Committee any individual who is in the regular full-
     time employ of the Food and Drug Administration or any agency 
     responsible for the enforcement of this Act. The Secretary 
     may appoint Federal officials as ex officio members.

[[Page 10540]]

       ``(3) Chairperson.--The Secretary shall designate 1 of the 
     members of the Advisory Committee to serve as chairperson.
       ``(c) Duties.--The Tobacco Products Scientific Advisory 
     Committee shall provide advice, information, and 
     recommendations to the Secretary--
       ``(1) as provided in this chapter;
       ``(2) on the effects of the alteration of the nicotine 
     yields from tobacco products;
       ``(3) on whether there is a threshold level below which 
     nicotine yields do not produce dependence on the tobacco 
     product involved; and
       ``(4) on its review of other safety, dependence, or health 
     issues relating to tobacco products as requested by the 
     Secretary.
       ``(d) Compensation; Support; FACA.--
       ``(1) Compensation and travel.--Members of the Advisory 
     Committee who are not officers or employees of the United 
     States, while attending conferences or meetings of the 
     committee or otherwise engaged in its business, shall be 
     entitled to receive compensation at rates to be fixed by the 
     Secretary, which may not exceed the daily equivalent of the 
     rate in effect for level 4 of the Senior Executive Schedule 
     under section 5382 of title 5, United States Code, for each 
     day (including travel time) they are so engaged; and while so 
     serving away from their homes or regular places of business 
     each member may be allowed travel expenses, including per 
     diem in lieu of subsistence, as authorized by section 5703 of 
     title 5, United States Code, for persons in the Government 
     service employed intermittently.
       ``(2) Administrative support.--The Secretary shall furnish 
     the Advisory Committee clerical and other assistance.
       ``(3) Nonapplication of faca.--Section 14 of the Federal 
     Advisory Committee Act (5 U.S.C. 
     App.) does not apply to the Advisory Committee.
       ``(e) Proceedings of Advisory Panels and Committees.--The 
     Advisory Committee shall make and maintain a transcript of 
     any proceeding of the panel or committee. Each such panel and 
     committee shall delete from any transcript made under this 
     subsection information which is exempt from disclosure under 
     section 552(b) of title 5, United States Code.

     ``SEC. 919. DRUG PRODUCTS USED TO TREAT TOBACCO DEPENDENCE.

       ``The Secretary shall consider--
       ``(1) at the request of the applicant, designating nicotine 
     replacement products as fast track research and approval 
     products within the meaning of section 506;
       ``(2) direct the Commissioner to consider approving the 
     extended use of nicotine replacement products (such as 
     nicotine patches, nicotine gum, and nicotine lozenges) for 
     the treatment of tobacco dependence;
       ``(3) review and consider the evidence for additional 
     indications for nicotine replacement products, such as for 
     craving relief or relapse prevention; and
       ``(4) consider--
       ``(A) relieving companies of premarket burdens under 
     section 505 if the requirement is redundant considering other 
     nicotine replacement therapies already on the market; and
       ``(B) time and extent applications for nicotine replacement 
     therapies that have been approved by a regulatory body in a 
     foreign country and have marketing experience in such 
     country.

     ``SEC. 920. USER FEE.

       ``(a) Establishment of Quarterly User Fee.--The Secretary 
     shall assess a quarterly user fee with respect to every 
     quarter of each fiscal year commencing fiscal year 2004, 
     calculated in accordance with this section, upon each 
     manufacturer and importer of tobacco products subject to this 
     chapter.
       ``(b) Funding of FDA Regulation of Tobacco Products.--The 
     Secretary shall make user fees collected pursuant to this 
     section available to pay, in each fiscal year, for the costs 
     of the activities of the Food and Drug Administration related 
     to the regulation of tobacco products under this chapter.
       ``(c) Assessment of User Fee.--
       ``(1) Amount of assessment.--Except as provided in 
     paragraph (4), the total user fees assessed each year 
     pursuant to this section shall be sufficient, and shall not 
     exceed what is necessary, to pay for the costs of the 
     activities described in subsection (b) for each fiscal year.
       ``(2) Allocation of assessment by class of tobacco 
     products.--
       ``(A) In general.--Subject to paragraph (3), the total user 
     fees assessed each fiscal year with respect to each class of 
     importers and manufacturers shall be equal to an amount that 
     is the applicable percentage of the total costs of activities 
     of the Food and Drug Administration described in subsection 
     (b).
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A) the applicable percentage for a fiscal year shall be the 
     following:
       ``(i) 92.07 percent shall be assessed on manufacturers and 
     importers of cigarettes;
       ``(ii) 0.05 percent shall be assessed on manufacturers and 
     importers of little cigars;
       ``(iii) 7.15 percent shall be assessed on manufacturers and 
     importers of cigars other than little cigars;
       ``(iv) 0.43 percent shall be assessed on manufacturers and 
     importers of snuff;
       ``(v) 0.10 percent shall be assessed on manufacturers and 
     importers of chewing tobacco;
       ``(vi) 0.06 percent shall be assessed on manufacturers and 
     importers of pipe tobacco; and
       ``(vii) 0.14 percent shall be assessed on manufacturers and 
     importers of roll-your-own tobacco.
       ``(3) Distribution of fee shares of manufacturers and 
     importers exempt from user fee.--Where a class of tobacco 
     products is not subject to a user fee under this section, the 
     portion of the user fee assigned to such class under 
     subsection (d)(2) shall be allocated by the Secretary on a 
     pro rata basis among the classes of tobacco products that are 
     subject to a user fee under this section. Such pro rata 
     allocation for each class of tobacco products that are 
     subject to a user fee under this section shall be the 
     quotient of--
       ``(A) the sum of the percentages assigned to all classes of 
     tobacco products subject to this section; divided by
       ``(B) the percentage assigned to such class under paragraph 
     (2).
       ``(4) Annual limit on assessment.--The total assessment 
     under this section--
       ``(A) for fiscal year 2004 shall be $85,000,000;
       ``(B) for fiscal year 2005 shall be $175,000,000;
       ``(C) for fiscal year 2006 shall be $$300,000,000; and
       ``(D) for each subsequent fiscal year, shall not exceed the 
     limit on the assessment imposed during the previous fiscal 
     year, as adjusted by the Secretary (after notice, published 
     in the Federal Register) to reflect the greater of--
       ``(i) the total percentage change that occurred in the 
     Consumer Price Index for all urban consumers (all items; 
     United States city average) for the 12-month period ending on 
     June 30 of the preceding fiscal year for which fees are being 
     established; or
       ``(ii) the total percentage change for the previous fiscal 
     year in basic pay under the General Schedule in accordance 
     with section 5332 of title 5, United States Code, as adjusted 
     by any locality-based comparability payment pursuant to 
     section 5304 of such title for Federal employees stationed in 
     the District of Columbia.
       ``(5) Timing of user fee assessment.--The Secretary shall 
     notify each manufacturer and importer of tobacco products 
     subject to this section of the amount of the quarterly 
     assessment imposed on such manufacturer or importer under 
     subsection (f) during each quarter of each fiscal year. Such 
     notifications shall occur not earlier than 3 months prior to 
     the end of the quarter for which such assessment is made, and 
     payments of all assessments shall be made not later than 60 
     days after each such notification.
       ``(d) Determination of User Fee by Company Market Share.--
       ``(1) In general.--The user fee to be paid by each 
     manufacturer or importer of a given class of tobacco products 
     shall be determined in each quarter by multiplying--
       ``(A) such manufacturer's or importer's market share of 
     such class of tobacco products; by
       ``(B) the portion of the user fee amount for the current 
     quarter to be assessed on manufacturers and importers of such 
     class of tobacco products as determined under subsection (e).
       ``(2) No fee in excess of market share.--No manufacturer or 
     importer of tobacco products shall be required to pay a user 
     fee in excess of the market share of such manufacturer or 
     importer.
       ``(e) Determination of Volume of Domestic Sales.--
       ``(1) In general.--The calculation of gross domestic volume 
     of a class of tobacco product by a manufacturer or importer, 
     and by all manufacturers and importers as a group, shall be 
     made by the Secretary using information provided by 
     manufacturers and importers pursuant to subsection (f), as 
     well as any other relevant information provided to or 
     obtained by the Secretary.
       ``(2) Measurement.--For purposes of the calculations under 
     this subsection and the information provided under subsection 
     (f) by the Secretary, gross domestic volume shall be measured 
     by--
       ``(A) in the case of cigarettes, the number of cigarettes 
     sold;
       ``(B) in the case of little cigars, the number of little 
     cigars sold;
       ``(C) in the case of large cigars, the number of cigars 
     weighing more than 3 pounds per thousand sold; and
       ``(D) in the case of other classes of tobacco products, in 
     terms of number of pounds, or fraction thereof, of these 
     products sold.
       ``(f) Measurement of Gross Domestic Volume.--
       ``(1) In general.--Each manufacturer and importer of 
     tobacco products shall submit to the Secretary a certified 
     copy of each of the returns or forms described by this 
     paragraph that are required to be filed with a Government 
     agency on the same date that those returns or forms are 
     filed, or required to be filed, with such agency. The returns 
     and forms described by this paragraph are those returns and 
     forms related to the release of tobacco products into 
     domestic commerce, as defined by section 5702(k) of the 
     Internal Revenue Code of 1986, and the repayment of the taxes 
     imposed under chapter 52 of such Code (ATF Form 500.24 and 
     United States

[[Page 10541]]

     Customs Form 7501 under currently applicable regulations).
       ``(2) Penalties.--Any person that knowingly fails to 
     provide information required under this subsection or that 
     provides false information under this subsection shall be 
     subject to the penalties described in section 1003 of title 
     18, United States Code. In addition, such person may be 
     subject to a civil penalty in an amount not to exceed 2 
     percent of the value of the kind of tobacco products 
     manufactured or imported by such person during the applicable 
     quarter, as determined by the Secretary.
       ``(h) Effective Date.--The user fees prescribed by this 
     section shall be assessed in fiscal year 2004, based on 
     domestic sales of tobacco products during fiscal year 2003 
     and shall be assessed in each fiscal year thereafter.''.

     SEC. 102. INTERIM FINAL RULE.

       (a) Cigarettes and Smokeless Tobacco.--
       (1) In general.--Not later than 30 days after the date of 
     enactment of this Act, the Secretary of Health and Human 
     Services shall publish in the Federal Register an interim 
     final rule regarding cigarettes and smokeless tobacco, which 
     is hereby deemed to be in compliance with the Administrative 
     Procedures Act and other applicable law.
       (2) Contents of rule.--Except as provided in this 
     subsection, the interim final rule published under paragraph 
     (1), shall be identical in its provisions to part 897 of the 
     regulations promulgated by the Secretary of Health and Human 
     Services in the August 28, 1996, issue of the Federal 
     Register (61 Fed. Reg., 44615-44618). Such rule shall--
       (A) provide for the designation of jurisdictional authority 
     that is in accordance with this subsection;
       (B) strike Subpart C--Labeling and section 897.32(c); and
       (C) become effective not later than 1 year after the date 
     of enactment of this Act.
       (3) Amendments to rule.--Prior to making amendments to the 
     rule published under paragraph (1), the Secretary shall 
     promulgate a proposed rule in accordance with the 
     Administrative Procedures Act.
       (4) Rule of construction.--Except as provided in paragraph 
     (3), nothing in this section shall be construed to limit the 
     authority of the Secretary to amend, in accordance with the 
     Administrative Procedures Act, the regulation promulgated 
     pursuant to this section.
       (b) Limitation on Advisory Opinions.--As of the date of 
     enactment of this Act, the following documents issued by the 
     Food and Drug Administration shall not constitute advisory 
     opinions under section 10.85(d)(1) of title 21, Code of 
     Federal Regulations, except as they apply to tobacco 
     products, and shall not be cited by the Secretary of Health 
     and Human Services or the Food and Drug Administration as 
     binding precedent:
       (1) The preamble to the proposed rule in the document 
     entitled ``Regulations Restricting the Sale and Distribution 
     of Cigarettes and Smokeless Tobacco Products to Protect 
     Children and Adolescents'' (60 Fed. Reg. 41314-41372 (August 
     11, 1995)).
       (2) The document entitled ``Nicotine in Cigarettes and 
     Smokeless Tobacco Products is a Drug and These Products Are 
     Nicotine Delivery Devices Under the Federal Food, Drug, and 
     Cosmetic Act'' (60 Fed. Reg. 41453-41787 (August 11, 1995)).
       (3) The preamble to the final rule in the document entitled 
     ``Regulations Restricting the Sale and Distribution of 
     Cigarettes and Smokeless Tobacco to Protect Children and 
     Adolescents'' (61 Fed. Reg. 44396-44615 (August 28, 1996)).
       (4) The document entitled ``Nicotine in Cigarettes and 
     Smokeless Tobacco is a Drug and These Products are Nicotine 
     Delivery Devices Under the Federal Food, Drug, and Cosmetic 
     Act; Jurisdictional Determination'' (61 Fed. Reg. 44619-45318 
     (August 28, 1996)).

     SEC. 103. CONFORMING AND OTHER AMENDMENTS TO GENERAL 
                   PROVISIONS.

       (a) Amendment of Federal Food, Drug, and Cosmetic Act.--
     Except as otherwise expressly provided, whenever in this 
     section an amendment is expressed in terms of an amendment 
     to, or repeal of, a section or other provision, the reference 
     is to a section or other provision of the Federal Food, Drug, 
     and Cosmetic Act (21 U.S.C. 301 et seq.).
       (b) Section 301.--Section 301 (21 U.S.C. 331) is amended--
       (1) in subsection (a), by inserting ``tobacco product,'' 
     after ``device,'';
       (2) in subsection (b), by inserting ``tobacco product,'' 
     after ``device,'';
       (3) in subsection (c), by inserting ``tobacco product,'' 
     after ``device,'';
       (4) in subsection (e), by striking ``515(f), or 519'' and 
     inserting ``515(f), 519, or 909'';
       (5) in subsection (g), by inserting ``tobacco product,'' 
     after ``device,'';
       (6) in subsection (h), by inserting ``tobacco product,'' 
     after ``device,'';
       (7) in subsection (j), by striking ``708, or 721'' and 
     inserting ``708, 721, 904, 905, 906, 907, 908, 909, or 
     section 921(b)'';
       (8) in subsection (k), by inserting ``tobacco product,'' 
     after ``device,'';
       (9) by striking subsection (p) and inserting the following:
       ``(p) The failure to register in accordance with section 
     510 or 905, the failure to provide any information required 
     by section 510(j), 510(k), 905(i), or 905(j), or the failure 
     to provide a notice required by section 510(j)(2) or 
     905(i)(2).'';
       (10) by striking subsection (q)(1) and inserting the 
     following:
       ``(q)(1) The failure or refusal--
       ``(A) to comply with any requirement prescribed under 
     section 518, 520(g), 903(b)(8), or 908, or condition 
     prescribed under section 903(b)(6)(B)(ii)(II);
       ``(B) to furnish any notification or other material or 
     information required by or under section 519, 520(g), 904, 
     909, or section 921; or
       ``(C) to comply with a requirement under section 522 or 
     913.'';
       (11) in subsection (q)(2), by striking ``device,'' and 
     inserting ``device or tobacco product,'';
       (12) in subsection (r), by inserting ``or tobacco product'' 
     after ``device'' each time that it appears; and
       (13) by adding at the end the following:
       ``(aa) The sale of tobacco products in violation of a no-
     tobacco-sale order issued under section 303(f).
       ``(bb) The introduction or delivery for introduction into 
     interstate commerce of a tobacco product in violation of 
     section 911.
       ``(cc)(1) Forging, counterfeiting, simulating, or falsely 
     representing, or without proper authority using any mark, 
     stamp (including tax stamp), tag, label, or other 
     identification device upon any tobacco product or container 
     or labeling thereof so as to render such tobacco product a 
     counterfeit tobacco product.
       ``(2) Making, selling, disposing of, or keeping in 
     possession, control, or custody, or concealing any punch, 
     die, plate, stone, or other item that is designed to print, 
     imprint, or reproduce the trademark, trade name, or other 
     identifying mark, imprint, or device of another or any 
     likeness of any of the foregoing upon any tobacco product or 
     container or labeling thereof so as to render such tobacco 
     product a counterfeit tobacco product.
       ``(3) The doing of any act that causes a tobacco product to 
     be a counterfeit tobacco product, or the sale or dispensing, 
     or the holding for sale or dispensing, of a counterfeit 
     tobacco product.
       ``(dd) The charitable distribution of tobacco products.
       ``(ee) The failure of a manufacturer or distributor to 
     notify the Attorney General of their knowledge of tobacco 
     products used in illicit trade.''.
       (c) Section 303.--Section 303 (21 U.S.C. 333(f)) is amended 
     in subsection (f)--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(f) Civil Penalties; No-Tobacco-Sale Orders.--'';
       (2) in paragraph (1)(A), by inserting ``or tobacco 
     products'' after ``devices'';
       (3) by redesignating paragraphs (3), (4), and (5) as 
     paragraphs (4), (5), and (6), and inserting after paragraph 
     (2) the following:
       ``(3) If the Secretary finds that a person has committed 
     repeated violations of restrictions promulgated under section 
     906(d) at a particular retail outlet then the Secretary may 
     impose a no-tobacco-sale order on that person prohibiting the 
     sale of tobacco products in that outlet. A no-tobacco-sale 
     order may be imposed with a civil penalty under paragraph 
     (1).'';
       (4) in paragraph (4) as so redesignated--
       (A) in subparagraph (A)--
       (i) by striking ``assessed'' the first time it appears and 
     inserting ``assessed, or a no-tobacco-sale order may be 
     imposed,''; and
       (ii) by striking ``penalty'' and inserting ``penalty, or 
     upon whom a no-tobacco-order is to be imposed,'';
       (B) in subparagraph (B)--
       (i) by inserting after ``penalty,'' the following: ``or the 
     period to be covered by a no-tobacco-sale order,''; and
       (ii) by adding at the end the following: ``A no-tobacco-
     sale order permanently prohibiting an individual retail 
     outlet from selling tobacco products shall include provisions 
     that allow the outlet, after a specified period of time, to 
     request that the Secretary compromise, modify, or terminate 
     the order.''; and
       (C) by adding at the end, the following:
       ``(D) The Secretary may compromise, modify, or terminate, 
     with or without conditions, any no-tobacco-sale order.'';
       (5) in paragraph (5) as so redesignated--
       (A) by striking ``(3)(A)'' as redesignated, and inserting 
     ``(4)(A)'';
       (B) by inserting ``or the imposition of a no-tobacco-sale 
     order'' after ``penalty'' the first 2 places it appears; and
       (C) by striking ``issued.'' and inserting ``issued, or on 
     which the no-tobacco-sale order was imposed, as the case may 
     be.''; and
       (6) in paragraph (6), as so redesignated, by striking 
     ``paragraph (4)'' each place it appears and inserting 
     ``paragraph (5)''.
       (d) Section 304.--Section 304 (21 U.S.C. 334) is amended--
       (1) in subsection (a)(2)--
       (A) by striking ``and'' before ``(D)''; and
       (B) by striking ``device.'' and inserting the following: 
     ``, (E) Any adulterated or misbranded tobacco product.'';
       (2) in subsection (d)(1), by inserting ``tobacco product,'' 
     after ``device,'';
       (3) in subsection (g)(1), by inserting ``or tobacco 
     product'' after ``device'' each place it appears; and
       (4) in subsection (g)(2)(A), by inserting ``or tobacco 
     product'' after ``device'' each place it appears.

[[Page 10542]]

       (e) Section 702.--Section 702(a) (21 U.S.C. 372(a)) is 
     amended--
       (1) by inserting ``(1)'' after ``(a)''; and
       (2) by adding at the end thereof the following:
       ``(2) For a tobacco product, to the extent feasible, the 
     Secretary shall contract with the States in accordance with 
     paragraph (1) to carry out inspections of retailers in 
     connection with the enforcement of this Act.''.
       (f) Section 703.--Section 703 (21 U.S.C. 373) is amended--
       (1) by inserting ``tobacco product,'' after ``device,'' 
     each place it appears; and
       (2) by inserting ``tobacco products,'' after ``devices,'' 
     each place it appears.
       (g) Section 704.--Section 704 (21 U.S.C. 374) is amended--
       (1) in subsection (a)(1)(A), by inserting ``tobacco 
     products,'' after ``devices,'' each place it appears;
       (2) in subsection (a)(1)(B), by inserting ``or tobacco 
     product'' after ``restricted devices'' each place it appears; 
     and
       (3) in subsection (b), by inserting ``tobacco product,'' 
     after ``device,''.
       (h) Section 705.--Section 705(b) (21 U.S.C. 375(b)) is 
     amended by inserting ``tobacco products,'' after 
     ``devices,''.
       (i) Section 709.--Section 709 (21 U.S.C. 379) is amended by 
     inserting ``or tobacco product'' after ``device''.
       (j) Section 801.--Section 801 (21 U.S.C. 381) is amended--
       (1) in subsection (a)--
       (A) by inserting ``tobacco products,'' after ``devices,'' 
     the first time it appears;
       (B) by inserting ``or section 905(j)'' after ``section 
     510''; and
       (C) by striking ``drugs or devices'' each time it appears 
     and inserting ``drugs, devices, or tobacco products'';
       (2) in subsection (e)(1), by inserting ``tobacco product,'' 
     after ``device,''; and
       (3) by adding at the end the following:
       ``(p)(1) Not later than 2 years after the date of enactment 
     of the Family Smoking Prevention and Tobacco Control Act, and 
     annually thereafter, the Secretary shall submit to the 
     Committee on Health, Education, Labor, and Pensions of the 
     Senate and the Committee on Energy and Commerce of the House 
     of Representatives, a report regarding--
       ``(A) the nature, extent, and destination of United States 
     tobacco product exports that do not conform to tobacco 
     product standards established pursuant to this Act;
       ``(B) the public health implications of such exports, 
     including any evidence of a negative public health impact; 
     and
       ``(C) recommendations or assessments of policy alternatives 
     available to Congress and the Executive Branch to reduce any 
     negative public health impact caused by such exports.
       ``(2) The Secretary is authorized to establish appropriate 
     information disclosure requirements to carry out this 
     subsection.''.
       (k) Section 1003.--Section 1003(d)(2)(C) (as redesignated 
     by section 101(a)) is amended--
       (1) by striking ``and'' after ``cosmetics,''; and
       (2) inserting a comma and ``and tobacco products'' after 
     ``devices''.
       (l) Effective Date for No-Tobacco-Sale Order Amendments.--
     The amendments made by subsection (c), other than the 
     amendment made by paragraph (2) of such subsection, shall 
     take effect upon the issuance of guidance by the Secretary of 
     Health and Human Services--
       (1) defining the term ``repeated violation'', as used in 
     section 303(f) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 333(f)) as amended by subsection (c), by 
     identifying the number of violations of particular 
     requirements over a specified period of time at a particular 
     retail outlet that constitute a repeated violation;
       (2) providing for timely and effective notice to the 
     retailer of each alleged violation at a particular retail 
     outlet and an expedited procedure for the administrative 
     appeal of an alleged violation;
       (3) providing that a person may not be charged with a 
     violation at a particular retail outlet unless the Secretary 
     has provided notice to the retailer of all previous 
     violations at that outlet;
       (4) establishing a period of time during which, if there 
     are no violations by a particular retail outlet, that outlet 
     will not considered to have been the site of repeated 
     violations when the next violation occurs; and
       (5) providing that good faith reliance on the presentation 
     of a false government issued photographic identification that 
     contains the bearer's date of birth does not constitute a 
     violation of any minimum age requirement for the sale of 
     tobacco products if the retailer has taken effective steps to 
     prevent such violations, including--
       (A) adopting and enforcing a written policy against sales 
     to minors;
       (B) informing its employees of all applicable laws;
       (C) establishing disciplinary sanctions for employee 
     noncompliance; and
       (D) requiring its employees to verify age by way of 
     photographic identification or electronic scanning device.

 TITLE II--TOBACCO PRODUCT WARNINGS; CONSTITUENT AND SMOKE CONSTITUENT 
                               DISCLOSURE

     SEC. 201. CIGARETTE LABEL AND ADVERTISING WARNINGS.

       Section 4 of the Federal Cigarette Labeling and Advertising 
     Act (15 U.S.C. 1333) is amended to read as follows:

     ``SEC. 4. LABELING.

       ``(a) Label Requirements.--
       ``(1) In general.--It shall be unlawful for any person to 
     manufacture, package, sell, offer to sell, distribute, or 
     import for sale or distribution within the United States any 
     cigarettes the package of which fails to bear, in accordance 
     with the requirements of this section, one of the following 
     labels:

     `WARNING: Cigarettes are addictive'.
     `WARNING: Tobacco smoke can harm your children'.
     `WARNING: Cigarettes cause fatal lung disease'.
     `WARNING: Cigarettes cause cancer'.
     `WARNING: Cigarettes cause strokes and heart disease'.
     `WARNING: Smoking during pregnancy can harm your baby'.
     `WARNING: Smoking can kill you'.
     `WARNING: Tobacco smoke causes fatal lung disease in non-
     smokers'.
     `WARNING: Quitting smoking now greatly reduces serious risks 
     to your health'.

       ``(2) Placement; typography; etc.--
       ``(A) In general.--Each label statement required by 
     paragraph (1) shall be located in the upper portion of the 
     front and rear panels of the package, directly on the package 
     underneath the cellophane or other clear wrapping. Except as 
     provided in subparagraph (B), each label statement shall 
     comprise at least the top 30 percent of the front and rear 
     panels of the package. The word `WARNING' shall appear in 
     capital letters and all text shall be in conspicuous and 
     legible 17-point type, unless the text of the label statement 
     would occupy more than 70 percent of such area, in which case 
     the text may be in a smaller conspicuous and legible type 
     size, provided that at least 60 percent of such area is 
     occupied by required text. The text shall be black on a white 
     background, or white on a black background, in a manner that 
     contrasts, by typography, layout, or color, with all other 
     printed material on the package, in an alternating fashion 
     under the plan submitted under subsection (b)(4).
       ``(B) Flip-top boxes.--For any cigarette brand package 
     manufactured or distributed before January 1, 2000, which 
     employs a flip-top style (if such packaging was used for that 
     brand in commerce prior to June 21, 1997), the label 
     statement required by paragraph (1) shall be located on the 
     flip-top area of the package, even if such area is less than 
     25 percent of the area of the front panel. Except as provided 
     in this paragraph, the provisions of this subsection shall 
     apply to such packages.
       ``(3) Does not apply to foreign distribution.--The 
     provisions of this subsection do not apply to a tobacco 
     product manufacturer or distributor of cigarettes which does 
     not manufacture, package, or import cigarettes for sale or 
     distribution within the United States.
       ``(4) Applicability to retailers.--A retailer of cigarettes 
     shall not be in violation of this subsection for packaging 
     that is supplied to the retailer by a tobacco product 
     manufacturer, importer, or distributor and is not altered by 
     the retailer in a way that is material to the requirements of 
     this subsection except that this paragraph shall not relieve 
     a retailer of liability if the retailer sells or distributes 
     tobacco products that are not labeled in accordance with this 
     subsection.
       ``(b) Advertising Requirements.--
       ``(1) In general.--It shall be unlawful for any tobacco 
     product manufacturer, importer, distributor, or retailer of 
     cigarettes to advertise or cause to be advertised within the 
     United States any cigarette unless its advertising bears, in 
     accordance with the requirements of this section, one of the 
     labels specified in subsection (a) of this section.
       ``(2) Typography, etc.--Each label statement required by 
     subsection (a) of this section in cigarette advertising shall 
     comply with the standards set forth in this paragraph. For 
     press and poster advertisements, each such statement and 
     (where applicable) any required statement relating to tar, 
     nicotine, or other constituent (including a smoke 
     constituent) yield shall comprise at least 20 percent of the 
     area of the advertisement and shall appear in a conspicuous 
     and prominent format and location at the top of each 
     advertisement within the trim area. The Secretary may revise 
     the required type sizes in such area in such manner as the 
     Secretary determines appropriate. The word `WARNING' shall 
     appear in capital letters, and each label statement shall 
     appear in conspicuous and legible type. The text of the label 
     statement shall be black if the background is white and white 
     if the background is black, under the plan submitted under 
     paragraph (4) of this subsection. The label statements shall 
     be enclosed by a rectangular border that is the same color as 
     the letters of the statements and that is the width of the 
     first downstroke of the capital `W' of the word `WARNING' in 
     the label statements. The text of such label statements shall 
     be in a typeface pro rata to the following requirements: 45-
     point type for a whole-page broadsheet newspaper 
     advertisement; 39-point type for a half-page broadsheet 
     newspaper advertisement; 39-point type for a

[[Page 10543]]

     whole-page tabloid newspaper advertisement; 27-point type for 
     a half-page tabloid newspaper advertisement; 31.5-point type 
     for a double page spread magazine or whole-page magazine 
     advertisement; 22.5-point type for a 28 centimeter by 3 
     column advertisement; and 15-point type for a 20 centimeter 
     by 2 column advertisement. The label statements shall be in 
     English, except that in the case of--
       ``(A) an advertisement that appears in a newspaper, 
     magazine, periodical, or other publication that is not in 
     English, the statements shall appear in the predominant 
     language of the publication; and
       ``(B) in the case of any other advertisement that is not in 
     English, the statements shall appear in the same language as 
     that principally used in the advertisement.
       ``(3) Matchbooks.--Notwithstanding paragraph (2), for 
     matchbooks (defined as containing not more than 20 matches) 
     customarily given away with the purchase of tobacco products, 
     each label statement required by subsection (a) may be 
     printed on the inside cover of the matchbook.
       ``(4) Adjustment by secretary.--The Secretary may, through 
     a rulemaking under section 553 of title 5, United States 
     Code, adjust the format and type sizes for the label 
     statements required by this section or the text, format, and 
     type sizes of any required tar, nicotine yield, or other 
     constituent (including smoke constituent) disclosures, or to 
     establish the text, format, and type sizes for any other 
     disclosures required under the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 301 et. seq.). The text of any such 
     label statements or disclosures shall be required to appear 
     only within the 20 percent area of cigarette advertisements 
     provided by paragraph (2) of this subsection. The Secretary 
     shall promulgate regulations which provide for adjustments in 
     the format and type sizes of any text required to appear in 
     such area to ensure that the total text required to appear by 
     law will fit within such area.
       ``(5) Marketing requirements.--
       ``(A) The label statements specified in subsection (a)(1) 
     shall be randomly displayed in each 12-month period, in as 
     equal a number of times as is possible on each brand of the 
     product and be randomly distributed in all areas of the 
     United States in which the product is marketed in accordance 
     with a plan submitted by the tobacco product manufacturer, 
     importer, distributor, or retailer and approved by the 
     Secretary.
       ``(B) The label statements specified in subsection (a)(1) 
     shall be rotated quarterly in alternating sequence in 
     advertisements for each brand of cigarettes in accordance 
     with a plan submitted by the tobacco product manufacturer, 
     importer, distributor, or retailer to, and approved by, the 
     Secretary.
       ``(C) The Secretary shall review each plan submitted under 
     subparagraph (B) and approve it if the plan--
       ``(i) will provide for the equal distribution and display 
     on packaging and the rotation required in advertising under 
     this subsection; and
       ``(ii) assures that all of the labels required under this 
     section will be displayed by the tobacco product 
     manufacturer, importer, distributor, or retailer at the same 
     time.
       ``(6) Applicability to retailers.--This subsection applies 
     to a retailer only if that retailer is responsible for or 
     directs the label statements required under this section 
     except that this paragraph shall not relieve a retailer of 
     liability if the retailer displays, in a location open to the 
     public, an advertisement that is not labeled in accordance 
     with the requirements of this subsection.''.

     SEC. 202. AUTHORITY TO REVISE CIGARETTE WARNING LABEL 
                   STATEMENTS.

       Section 4 of the Federal Cigarette Labeling and Advertising 
     Act (15 U.S.C. 1333), as amended by section 201, is further 
     amended by adding at the end the following:
       ``(c) Change in Required Statements.--The Secretary may, by 
     a rulemaking conducted under section 553 of title 5, United 
     States Code, adjust the format, type size, and text of any of 
     the label requirements, require color graphics to accompany 
     the text, increase the required label area from 30 percent up 
     to 50 percent of the front and rear panels of the package, or 
     establish the format, type size, and text of any other 
     disclosures required under the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 301 et seq.), if the Secretary finds 
     that such a change would promote greater public understanding 
     of the risks associated with the use of tobacco products.''.

     SEC. 203. STATE REGULATION OF CIGARETTE ADVERTISING AND 
                   PROMOTION.

       Section 5 of the Federal Cigarette Labeling and Advertising 
     Act (15 U.S.C. 1334) is amended by adding a the end the 
     following:
       ``(c) Exception.--Notwithstanding subsection (b), a State 
     or locality may enact statutes and promulgate regulations, 
     based on smoking and health, that take effect after the 
     effective date of the Family Smoking Prevention and Tobacco 
     Control Act, imposing specific bans or restrictions on the 
     time, place, and manner, but not content, of the advertising 
     or promotion of any cigarettes.''.

     SEC. 204. SMOKELESS TOBACCO LABELS AND ADVERTISING WARNINGS.

       Section 3 of the Comprehensive Smokeless Tobacco Health 
     Education Act of 1986 (15 U.S.C. 4402) is amended to read as 
     follows:

     ``SEC. 3. SMOKELESS TOBACCO WARNING.

       ``(a) General Rule.--
       ``(1) It shall be unlawful for any person to manufacture, 
     package, sell, offer to sell, distribute, or import for sale 
     or distribution within the United States any smokeless 
     tobacco product unless the product package bears, in 
     accordance with the requirements of this Act, one of the 
     following labels:

     `WARNING: This product can cause mouth cancer'.
     `WARNING: This product can cause gum disease and tooth loss'.
     `WARNING: This product is not a safe alternative to 
     cigarettes'.
     `WARNING: Smokeless tobacco is addictive'.

       ``(2) Each label statement required by paragraph (1) shall 
     be--
       ``(A) located on the 2 principal display panels of the 
     package, and each label statement shall comprise at least 30 
     percent of each such display panel; and
       ``(B) in 17-point conspicuous and legible type and in black 
     text on a white background, or white text on a black 
     background, in a manner that contrasts by typography, layout, 
     or color, with all other printed material on the package, in 
     an alternating fashion under the plan submitted under 
     subsection (b)(3), except that if the text of a label 
     statement would occupy more than 70 percent of the area 
     specified by subparagraph (A), such text may appear in a 
     smaller type size, so long as at least 60 percent of such 
     warning area is occupied by the label statement.
       ``(3) The label statements required by paragraph (1) shall 
     be introduced by each tobacco product manufacturer, packager, 
     importer, distributor, or retailer of smokeless tobacco 
     products concurrently into the distribution chain of such 
     products.
       ``(4) The provisions of this subsection do not apply to a 
     tobacco product manufacturer or distributor of any smokeless 
     tobacco product that does not manufacture, package, or import 
     smokeless tobacco products for sale or distribution within 
     the United States.
       ``(5) A retailer of smokeless tobacco products shall not be 
     in violation of this subsection for packaging that is 
     supplied to the retailer by a tobacco products manufacturer, 
     importer, or distributor and that is not altered by the 
     retailer unless the retailer offers for sale, sells, or 
     distributes a smokeless tobacco product that is not labeled 
     in accordance with this subsection.
       ``(b) Required Labels.--
       ``(1) It shall be unlawful for any tobacco product 
     manufacturer, packager, importer, distributor, or retailer of 
     smokeless tobacco products to advertise or cause to be 
     advertised within the United States any smokeless tobacco 
     product unless its advertising bears, in accordance with the 
     requirements of this section, one of the labels specified in 
     subsection (a).
       ``(2) Each label statement required by subsection (a) in 
     smokeless tobacco advertising shall comply with the standards 
     set forth in this paragraph. For press and poster 
     advertisements, each such statement and (where applicable) 
     any required statement relating to tar, nicotine, or other 
     constituent yield shall--
       ``(A) comprise at least 20 percent of the area of the 
     advertisement, and the warning area shall be delineated by a 
     dividing line of contrasting color from the advertisement; 
     and
       ``(B) the word `WARNING' shall appear in capital letters 
     and each label statement shall appear in conspicuous and 
     legible type. The text of the label statement shall be black 
     on a white background, or white on a black background, in an 
     alternating fashion under the plan submitted under paragraph 
     (3).
       ``(3)(A) The label statements specified in subsection 
     (a)(1) shall be randomly displayed in each 12-month period, 
     in as equal a number of times as is possible on each brand of 
     the product and be randomly distributed in all areas of the 
     United States in which the product is marketed in accordance 
     with a plan submitted by the tobacco product manufacturer, 
     importer, distributor, or retailer and approved by the 
     Secretary.
       ``(B) The label statements specified in subsection (a)(1) 
     shall be rotated quarterly in alternating sequence in 
     advertisements for each brand of smokeless tobacco product in 
     accordance with a plan submitted by the tobacco product 
     manufacturer, importer, distributor, or retailer to, and 
     approved by, the Secretary.
       ``(C) The Secretary shall review each plan submitted under 
     subparagraph (B) and approve it if the plan--
       ``(i) will provide for the equal distribution and display 
     on packaging and the rotation required in advertising under 
     this subsection; and
       ``(ii) assures that all of the labels required under this 
     section will be displayed by the tobacco product 
     manufacturer, importer, distributor, or retailer at the same 
     time.
       ``(D) This paragraph applies to a retailer only if that 
     retailer is responsible for or directs the label statements 
     under this section, unless the retailer displays in a 
     location open to the public, an advertisement that is not 
     labeled in accordance with the requirements of this 
     subsection.
       ``(c) Television and Radio Advertising.--It is unlawful to 
     advertise smokeless tobacco

[[Page 10544]]

     on any medium of electronic communications subject to the 
     jurisdiction of the Federal Communications Commission.''.

     SEC. 205. AUTHORITY TO REVISE SMOKELESS TOBACCO PRODUCT 
                   WARNING LABEL STATEMENTS.

       Section 3 of the Comprehensive Smokeless Tobacco Health 
     Education Act of 1986 (15 U.S.C. 4402), as amended by section 
     203, is further amended by adding at the end the following:
       ``(d) Authority To Revise Warning Label Statements.--The 
     Secretary may, by a rulemaking conducted under section 553 of 
     title 5, United States Code, adjust the format, type size, 
     and text of any of the label requirements, require color 
     graphics to accompany the text, increase the required label 
     area from 30 percent up to 50 percent of the front and rear 
     panels of the package, or establish the format, type size, 
     and text of any other disclosures required under the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), if the 
     Secretary finds that such a change would promote greater 
     public understanding of the risks associated with the use of 
     smokeless tobacco products.''.

     SEC. 206. TAR, NICOTINE, AND OTHER SMOKE CONSTITUENT 
                   DISCLOSURE TO THE PUBLIC.

       Section 4(a) of the Federal Cigarette Labeling and 
     Advertising Act (15 U.S.C. 1333 (a)), as amended by section 
     201, is further amended by adding at the end the following:
       ``(4)(A) The Secretary shall, by a rulemaking conducted 
     under section 553 of title 5, United States Code, determine 
     (in the Secretary's sole discretion) whether cigarette and 
     other tobacco product manufacturers shall be required to 
     include in the area of each cigarette advertisement specified 
     by subsection (b) of this section, or on the package label, 
     or both, the tar and nicotine yields of the advertised or 
     packaged brand. Any such disclosure shall be in accordance 
     with the methodology established under such regulations, 
     shall conform to the type size requirements of subsection (b) 
     of this section, and shall appear within the area specified 
     in subsection (b) of this section.
       ``(B) Any differences between the requirements established 
     by the Secretary under subparagraph (A) and tar and nicotine 
     yield reporting requirements established by the Federal Trade 
     Commission shall be resolved by a memorandum of understanding 
     between the Secretary and the Federal Trade Commission.
       ``(C) In addition to the disclosures required by 
     subparagraph (A) of this paragraph, the Secretary may, under 
     a rulemaking conducted under section 553 of title 5, United 
     States Code, prescribe disclosure requirements regarding the 
     level of any cigarette or other tobacco product constituent 
     including any smoke constituent. Any such disclosure may be 
     required if the Secretary determines that disclosure would be 
     of benefit to the public health, or otherwise would increase 
     consumer awareness of the health consequences of the use of 
     tobacco products, except that no such prescribed disclosure 
     shall be required on the face of any cigarette package or 
     advertisement. Nothing in this section shall prohibit the 
     Secretary from requiring such prescribed disclosure through a 
     cigarette or other tobacco product package or advertisement 
     insert, or by any other means under the Federal Food, Drug, 
     and Cosmetic Act (21 U.S.C. 301 et seq.).
       ``(D) This paragraph applies to a retailer only if that 
     retailer is responsible for or directs the label statements 
     required under this section, except that this paragraph shall 
     not relieve a retailer of liability if the retailer sells or 
     distributes tobacco products that are not labeled in 
     accordance with the requirements of this subsection.''.

       TITLE III--PREVENTION OF ILLICIT TRADE IN TOBACCO PRODUCTS

     SEC. 301. LABELING, RECORDKEEPING, RECORDS INSPECTION.

       Chapter IX of the Federal Food, Drug, and Cosmetic Act, as 
     added by section 101, is further amended by adding at the end 
     the following:

     ``SEC. 921. LABELING, RECORDKEEPING, RECORDS INSPECTION.

       ``(a) Origin Labeling.--The label, packaging, and shipping 
     containers of tobacco products for introduction or delivery 
     for introduction into interstate commerce shall bear the 
     statement `sale only allowed in the United States.'
       ``(b) Regulations Concerning Recordkeeping for Tracking and 
     Tracing.--
       ``(1) In general.--Not later than 9 months after the date 
     of enactment of the Family Smoking Prevention and Tobacco 
     Control Act, the Secretary shall promulgate regulations 
     regarding the establishment and maintenance of records by any 
     person who manufactures, processes, transports, distributes, 
     receives, packages, holds, exports, or imports tobacco 
     products.
       ``(2) Inspection.--In promulgating the regulations 
     described in paragraph (1), the Secretary shall consider 
     which records are needed for inspection to monitor the 
     movement of tobacco products from the point of manufacture 
     through distribution to retail outlets to assist in 
     investigating potential illicit trade, smuggling or 
     counterfeiting of tobacco products.
       ``(3) Codes.--The Secretary may require codes on the labels 
     of tobacco products or other designs or devices for the 
     purpose of tracking or tracing the tobacco product through 
     the distribution system.
       ``(4) Size of business.--The Secretary shall take into 
     account the size of a business in promulgating regulations 
     under this section.
       ``(5) Recordkeeping by retailers.--The Secretary shall not 
     require any retailer to maintain records relating to 
     individual purchasers of tobacco products for personal 
     consumption.
       ``(c) Records Inspection.--If the Secretary has a 
     reasonable belief that a tobacco product is part of an 
     illicit trade or smuggling or is a counterfeit product, each 
     person who manufactures, processes, transports, distributes, 
     receives, holds, packages, exports, or imports tobacco 
     products shall, at the request of an officer or employee duly 
     designated by the Secretary, permit such officer or employee, 
     at reasonable times and within reasonable limits and in a 
     reasonable manner, upon the presentation of appropriate 
     credentials and a written notice to such person, to have 
     access to and copy all records (including financial records) 
     relating to such article that are needed to assist the 
     Secretary in investigating potential illicit trade, smuggling 
     or counterfeiting of tobacco products.
       ``(d) Knowledge of Illegal Transaction.--If the 
     manufacturer or distributor of a tobacco product has 
     knowledge which reasonably supports the conclusion that a 
     tobacco product manufactured or distributed by such 
     manufacturer or distributor that has left the control of such 
     person may be or has been--
       ``(A) imported, exported, distributed or offered for sale 
     in interstate commerce by a person without paying duties or 
     taxes required by law; or
       ``(B) imported, exported, distributed or diverted for 
     possible illicit marketing,

     the manufacturer or distributor shall promptly notify the 
     Attorney General of such knowledge.
       ``(2) Knowledge defined.--For purposes of this subsection, 
     the term `knowledge' as applied to a manufacturer or 
     distributor means--
       ``(A) the actual knowledge that the manufacturer or 
     distributor had; or
       ``(B) the knowledge which a reasonable person would have 
     had under like circumstances or which would have been 
     obtained upon the exercise of due care.

     SEC. 302. STUDY AND REPORT.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study of cross-border trade in tobacco 
     products to--
       (1) collect data on cross-border trade in tobacco products, 
     including illicit trade and trade of counterfeit tobacco 
     products and make recommendations on the monitoring of such 
     trade;
       (2) collect data on cross-border advertising (any 
     advertising intended to be broadcast, transmitted, or 
     distributed from the United States to another country) of 
     tobacco products and make recommendations on how to prevent 
     or eliminate, and what technologies could help facilitate the 
     elimination of, cross-border advertising.
       (b) Report.--Not later than 18 months after the date of 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to the Committee on Health, Education, 
     Labor, and Pensions of the Senate and the Committee on Energy 
     and Commerce of the House of Representatives a report on the 
     study described in subsection (a).

  Mr. KENNEDY. Mr. President, today, Senator DeWine and I are 
introducing legislation to give the Food and Drug Administration broad 
authority to regulate tobacco products for the protection of the public 
health. We cannot in good conscience allow the Federal agency most 
responsible for protecting the public health to remain powerless to 
deal with the enormous risks of tobacco, the most deadly of all 
consumer products.
  This legislation is a fair and balanced approach to FDA regulation. 
It creates a new section in FDA jurisdiction for the regulation of 
tobacco products, with standards that allow for consideration of the 
unique issues raised by tobacco use. It is sensitive to the concerns of 
tobacco farmers, small businesses, and nicotine-dependent smokers. But, 
it clearly gives FDA the authority it needs in order to prevent youth 
smoking and to reduce addiction to this highly lethal product.
  The stakes are vast. Five thousand children have their first 
cigarette every day, and two thousand of them become daily smokers. 
Nearly a thousand of them will die prematurely from tobacco-induced 
diseases. Smoking is the number one preventable cause of death in the 
Nation today. Cigarettes kill well over 400,000 Americans each year. 
That is more lives lost than from automobile accidents, alcohol abuse, 
illegal drugs, AIDS, murder, suicide, and fires combined. Our response 
to a public health problem of this magnitude

[[Page 10545]]

must consist of more than half-way measures.
  We must deal firmly with tobacco company marketing practices that 
target children and mislead the public. The Food and Drug 
Administration needs broad authority to regulate the sale, 
distribution, and advertising of cigarettes and smokeless tobacco.
  The tobacco industry currently spends over $9 billion a year to 
promote its products. Much of that money is spent in ways designed to 
tempt children to start smoking, before they are mature enough to 
appreciate the enormity of the health risk. The industry knows that 
more than 90 percent of smokers begin as children and are addicted by 
the time they reach adulthood.
  Documents obtained from tobacco companies prove, in the companies' 
own words, the magnitude of the industry's efforts to trap children 
into dependency on their deadly product. Recent studies by the 
Institute of Medicine and the Centers for Disease Control show the 
substantial role of industry advertising in decisions by young people 
to use tobacco products.
  If we are serious about reducing youth smoking, FDA must have the 
power to prevent industry advertising designed to appeal to children 
wherever it will be seen by children. This legislation will give FDA 
the ability to stop tobacco advertising which glamorizes smoking from 
appearing where it will be seen by significant numbers of children. It 
grants FDA full authority to regulate tobacco advertising ``consistent 
with and to the full extent permitted by the First Amendment.''
  FDA authority must also extend to the sale of tobacco products. 
Nearly every State makes it illegal to sell cigarettes to children 
under 18, but surveys show that those laws are rarely enforced and 
frequently violated. FDA must have the power to limit the sale of 
cigarettes to face-to-face transactions in which the age of the 
purchaser can be verified by identification. This means an end to self-
service displays and vending machine sales. There must also be serious 
enforcement efforts with real penalties for those caught selling 
tobacco products to children. This is the only way to ensure that 
children under 18 are not able to buy cigarettes.
  The FDA conducted the longest rulemaking proceeding in its history, 
studying which regulations would most effectively reduce the number of 
children who smoke. Seven hundred thousand public comments were 
received in the course of that rulemaking. At the conclusion of its 
proceeding, the Agency promulgated rules on the manner in which 
cigarettes are advertised and sold. Due to litigation, most of those 
regulations were never implemented. If we are serious about curbing 
youth smoking as much as possible, as soon as possible; it makes no 
sense to require FDA to reinvent the wheel by conducting a new multi-
year rulemaking process on the same issues. This legislation will give 
the youth access and advertising restrictions already developed by FDA 
the immediate force of law, as if they had been issued under the new 
statute.
  The legislation also provides for stronger warnings on all cigarette 
and smokeless tobacco packages, and in all print advertisements. These 
warnings will be more explicit in their description of the medical 
problems which can result from tobacco use. The FDA is given the 
authority to change the text of these warning labels periodically, to 
keep their impact strong.
  Nicotine in cigarettes is highly addictive. Medical experts say that 
it is as addictive as heroin or cocaine. Yet for decades, tobacco 
companies have vehemently denied the addictiveness of their products. 
No one can forget the parade of tobacco executives who testified under 
oath before Congress that smoking cigarettes is not addictive. 
Overwhelming evidence in industry documents obtained through the 
discovery process proves that the companies not only knew of this 
addic-
tiveness for decades, but actually relied on it as the basis for their 
marketing strategy. As we now know, cigarette manufacturers chemically 
manipulated the nicotine in their products to make it even more 
addictive.
  The tobacco industry has a long, dishonorable history of providing 
misleading information about the health consequences of smoking. These 
companies have repeatedly sought to characterize their products as far 
less hazardous than they are. They made minor innovations in product 
design seem far more significant for the health of the user than they 
actually were. It is essential that FDA have clear and unambiguous 
authority to prevent such misrepresentations in the future. The largest 
disinformation campaign in the history of the corporate world must end.
  Given the addictiveness of tobacco products, it is essential that the 
FDA regulate them for the protection of the public health. Over forty 
million Americans are currently addicted to cigarettes. No responsible 
public health official believes that cigarettes should be banned. A ban 
would leave forty million people without a way to satisfy their drug 
dependency. FDA should be able to take the necessary steps to help 
addicted smokers overcome their addiction, and to make the product less 
toxic for smokers who are unable or unwilling to stop. To do so, FDA 
must have the authority to reduce or remove hazardous ingredients from 
cigarettes, to the extent that it becomes scientifically feasible. The 
inherent risk in smoking should not be unnecessarily compounded.
  Recent statements by several tobacco companies make clear that they 
plan to develop what they characterize as ``reduced risk'' cigarettes. 
This legislation will require manufacturers to submit such ``reduced 
risk'' products to the FDA for analysis before they can be marketed. No 
health-related claims will be permitted until they have been verified 
to the FDA's satisfaction. These safeguards are essential to prevent 
deceptive industry marketing campaigns, which could lull the public 
into a false sense of health safety.
  Smoking is the number one preventable cause of death in America. 
Congress must vest FDA not only with the responsibility for regulating 
tobacco products, but with full authority to do the job effectively.
  This legislation will give the FDA the legal authority it needs--to 
reduce youth smoking by preventing tobacco advertising which targets 
children--to prevent the sale of tobacco products to minors--to help 
smokers overcome their addiction--to make tobacco products less toxic 
for those who continue to use them--and to prevent the tobacco industry 
from misleading the public about the dangers of smoking.
  We believe that there is an excellent chance of enacting this bill 
this year. The interest of tobacco-state members in passing a tobacco 
farmers' quota buyout provides a golden opportunity. By joining a 
strong FDA bill with relief for tobacco farmers, we can assemble a 
broad, bipartisan coalition to accomplish both of these goals during 
this session. This approach is supported by the public health community 
and by farmers' organizations. Most importantly, it is the right thing 
to do for America's children.
                                 ______
                                 
      By Mr. WARNER (for himself, Mr. Lieberman, Mr. Roberts, and Mr. 
        Allen):
  S. 2462. A bill to provide additional assistance to recipients of 
Federal Pell Grants who are pursuing programs of study in engineering, 
mathematics, science, or foreign languages; to the Committee on Health, 
Education, Labor and Pensions.
  Mr. WARNER. Mr. President, I rise today to introduce an important 
bill related to education and our national, homeland, and economic 
security. I am pleased to be joined in this bipartisan effort with 
Senators Lieberman, Roberts, and Allen, and I am grateful to each of 
them for working closely with me in crafting this legislation.
  Some 50 plus years ago, I was a high school drop-out. I left school 
at the age of 17 to enlist in the Navy to serve this country in World 
War II. In the military, I earned the rank of Petty Officer 3rd Class, 
electronic technician's mate. And, it was in this role that I earned my 
first bit of technical education.
  In return for my service, I was lucky enough to earn a GI Bill that 
helped

[[Page 10546]]

me go to college at Washington & Lee University where I earned a degree 
in engineering. Subsequently, I joined the Marines and earned a second 
GI Bill that allowed me to attend the University of Virginia where I 
earned my law degree.
  Without the GI bill, I certainly might not have earned the education 
that I was fortunate enough to receive, and I certainly would not be 
standing here today in the United States Senate. That is why I feel so 
very strongly that we must support education in this country. Today's 
generation of students should have at least the same opportunity to 
earn their education that I had, if not more.
  We are fortunate in America that we have several important Federal 
programs to help make education more affordable for today's generation. 
Whether it is the GI Bill, the Americorp stipend, subsidized and 
unsubsidized Stafford loans, or any number of other Federal education 
programs, many Americans today who wish to obtain higher education have 
access to a variety of educational programs. I support strengthening 
these programs to increase access to higher education.
  Of all the educational grant programs, the Pell Grant program is the 
largest source of grant aid to help students pay for the costs 
associated with higher education. Eligibility for Pell Grants is based 
on financial need, and this year alone, Pell Grants helped 5.3 million 
undergraduate students attain higher education.
  Now, I am a strong supporter of the Pell Grant program. The $13.1 
billion that is being spent by the Federal Government on Pell Grants in 
fiscal year 2004 gives students access to higher education that 
otherwise might not have such access. But, I also recognize that the 
Pell Grant program was created in 1972 when the world was entirely 
different.
  Our world today is much more dangerous than it was back then, and 
much more dangerous than when I served this country with brief tours of 
duty in World War II and the Korean War.
  Today, while we're sleeping, people in other parts of the world are 
contriving of every possible way to take our business, our economy, our 
security, and our freedoms away from us. September 11, 2001, should 
remind us of this.
  Once, great oceans protected this Nation. But now, with the advent of 
the Internet and other modern technologies, the world is more connected 
than ever, and America is more vulnerable than ever in a lot of ways. 
Computer hackers all over the world try on a daily basis to hack into 
government computers. If successful, this could wreak havoc. 
Furthermore, each day, for whatever reason, people create computer 
viruses, and even the smallest virus can cost our economy billions of 
dollars.
  Simply put, in today's day and age, our country faces new challenges 
like never before. I ask--are we prepared to meet these challenges?
  Unfortunately, our institutions of higher learning are not producing 
enough American graduates with certain majors to meet our new 
challenges. In engineering, math, computer sciences, hard sciences, and 
certain foreign languages--America is coming up short.
  The statistics are alarming: the Third International Math and Science 
Study reports that U.S. 12th graders scored in only the 7th percentile 
in math worldwide, and only the 3rd percentile in science. This is near 
the bottom among major industrialized nations. The National Science 
Foundation reports that the fraction of U.S. Bachelor degrees in 
science and engineering have been declining for nearly 2 decades when 
compared to the rest of the world. While nearly two-thirds of Bachelor 
degrees in China and Singapore are science or engineering, they account 
for only about 17 percent in the United States. In fact, we currently 
rank 61st out of the 63 countries surveyed. Similarly, the National 
Science Board reports that the fraction of foreign born scientists and 
engineers in the U.S. workforce rose to an all time high by 2000. 
Amazingly, 38 percent of all people working in the United States with 
doctorate degrees in science or engineering are now foreign born.
  The effects of these educational trends are already being felt in 
various important ways. For example: the American Physical Society 
reports that the proportion of articles by American authors in the 
Physical Review, one of the most important research journals in the 
world, has hit an all time low of 29 percent, down from 61 percent in 
1983. And the U.S. production of patents, probably the most direct link 
between research and economic benefit, has declined steadily relative 
to the rest of the world for decades, and now stands at only 52 percent 
of the total.
  Despite these statistics, up to now, this country has been able to 
meet its new challenges by importing brain power from foreign 
countries. We are fortunate to have so many smart minds from other 
countries willing to come to the United States to fill critical science 
and engineering positions. However, the need for home-grown talent is 
becoming more and more apparent.
  First, international competition for this foreign brain power has 
become intense. As the National Science Board notes, ``Governments 
throughout the world recognize that a high-skill S&E workforce is 
essential for economic strength. Countries beyond the United States 
have been taking action to . . . attract foreign students and workers, 
and raise the attractiveness to their own citizenry of staying home or 
returning from abroad to serve growing national economies and research 
enterprises.'' This increased global competition for science and 
engineering workers ``comes at a time when demand for their skills is 
projected to rise significantly--both in the United States and 
throughout the global economy.''
  Without action on our part, though, America will lose out in the 
competition for these technically talented workers. According to the 
National Science Board, by 2010, if current trends continue, 
significantly less than 10 percent of all physical scientists and 
engineers in the world will be working in America.
  Increased global competition is not the only reason, though, that we 
have to promote a home-grown S&E workforce in America. In the post 9/11 
era, it is more important than ever from a security perspective to have 
American citizens performing certain tasks.
  The National Science Board put it best when they said, ``The ready 
availability of outstanding science and engineering talent from other 
countries is no longer assured, as international competition for the 
science and engineering workforce grows. Threats to world peace and 
domestic security create additional constraints on employment of 
foreign nationals in the United States.''
  I think the message is clear: Our S&E workforce is in crisis. If we 
do not act to encourage more American citizens to enter the high 
shortage areas in engineering, math, and science, then America may lose 
its historical advantage as the world's innovator.
  The consequences of this trend are also significant from a national 
security perspective. The defense-related research that goes into 
giving our men and women in the Armed Forces the best technology and 
equipment requires the special skills of engineers, scientists and 
computer scientists. Our military has always recognized these facts, 
and historically has been a tremendous supporter of science and 
engineering on a broad scale, from applied research to the most pure 
and esoteric of pursuits.
  Let me quote some numbers which make clear what a huge investment our 
defense community makes in science and engineering: According to the 
National Science Foundation, the Defense Department is by far the 
largest single supporter of science and technology in the Federal 
Government, accounting for about half of the total research dollars 
spent; the proportion of defense funding for University research in 
critical disciplines is very significant. For example, 90 percent of 
basic astronautical research is defense-funded. And, as you all must 
realize, University research is vastly important for training 
subsequent generations of high-quality researchers; and

[[Page 10547]]

in terms of technical manpower, defense-related scientists and 
engineers make up nearly 46 percent of the total Federal workforce. 
And, this includes 28 percent of all physical scientists, 48 percent of 
computer scientists and mathematicians, and 67 percent of all 
engineers.
  For well over a century these investments have given us advantages in 
technological fields that have provided our men and women of our Armed 
Forces the most advanced and powerful tools in existence, from 
submarines and airplanes to unmanned vehicles and the Internet. These 
technologies not only give our military an overwhelming advantage on 
the battlefield, they also save many lives.
  Yet, alarmingly, it is in the precise disciplines that produce these 
technologies and equipment where we see some of the greatest potential 
shortages in our science and engineering workforce. Numerous studies 
show that the number of domestic students in these critical fields has 
been falling steadily for years. And, without major investments to 
encourage more Americans to enter these critical fields, America is 
going to lose its status as the world's innovator and be placed in the 
precarious situation of having to rely on foreign countries to sell us 
the best equipment and the best technology for our troops. That is why 
it is paramount for America, from within, to produce the home-grown 
technical talent it needs.
  The consequences of inaction are enormous. And, while America's 
challenge is substantial, it is not insurmountable. Fortunately, we 
already have an existing Federal program up and running that, if 
modified, can help.
  Under current law, the $13.1 billion a year Pell Grant program awards 
recipients grants regardless of the course of study that the recipient 
chooses to pursue. So, under current law, 2 people from the same 
financial background are eligible for the same grant even though one 
chooses to major in the liberal arts while the other majors in 
engineering or science.
  While I believe studying the liberal arts is an important component 
to having an enlightened citizenry, I also believe that given the 
unique challenges we are facing in this country, it is appropriate for 
us to add an incentive to the Pell Grant program to encourage 
individuals to pursue courses of study where graduates are needed to 
meet our national security, homeland security, and economic security 
needs.
  That is why today I am introducing this legislation. The legislation 
is simple. It provides that at least every 2 years, our Secretary of 
Education, in consultation with the Secretary of Defense, the Secretary 
of Homeland Security, and others, should provide a list of courses of 
study where America needs home-grown talent to meet our national, 
homeland, and economic security needs. Those students who pursue 
courses of study in these programs will be rewarded through a doubling 
of their Pell Grant to help them with the costs associated with 
obtaining their education.
  We in the Congress have an obligation when expending taxpayer money, 
to do so in a manner that meets our Nation's needs. Our Nation 
desperately needs more highly trained domestic workers. That is an 
indisputable fact. And, in the Pell Grant program, we have over $13 
billion that is readily available to help meet this demand.
  In closing, our world is vastly different today than it was when the 
Pell Grant program was created in 1972. My legislation is a commonsense 
modification of the Pell Grant program that will help America meet its 
new challenges. I hope my colleagues will join me in this endeavor.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2462

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``21st Century Federal Pell 
     Grant Plus Act''.

     SEC. 2. RECIPIENTS OF FEDERAL PELL GRANTS WHO ARE PURSUING 
                   PROGRAMS OF STUDY IN ENGINEERING, MATHEMATICS, 
                   SCIENCE, OR FOREIGN LANGUAGES.

       Section 401(b)(2) of the Higher Education Act of 1965 (20 
     U.S.C. 1070a(b)(2)) is amended by adding at the end the 
     following:
       ``(C)(i) Notwithstanding subparagraph (A) and subject to 
     clause (iii), in the case of a student who is eligible under 
     this part and who is pursuing a degree with a major in, or a 
     certificate or program of study relating to, engineering, 
     mathematics, science (such as physics, chemistry, or computer 
     science), or a foreign language, described in a list 
     developed or updated under clause (ii), the amount of the 
     Federal Pell Grant shall be the amount calculated for the 
     student under subparagraph (A) for the academic year 
     involved, multiplied by 2.
       ``(ii)(I) The Secretary, in consultation with the Secretary 
     of Defense, the Secretary of the Department of Homeland 
     Security, and the Director of the National Science 
     Foundation, shall develop, update not less than once every 2 
     years, and publish in the Federal Register, a list of 
     engineering, mathematics, and science degrees, majors, 
     certificates, or programs that if pursued by a student, may 
     enable the student to receive the increased Federal Pell 
     Grant amount under clause (i). In developing and updating the 
     list the Secretaries and Director shall consider the 
     following:
       ``(aa) The current engineering, mathematics, and science 
     needs of the United States with respect to national security, 
     homeland security, and economic security.
       ``(bb) Whether institutions of higher education in the 
     United States are currently producing enough graduates with 
     degrees to meet the national security, homeland security, and 
     economic security needs of the United States.
       ``(cc) The future expected workforce needs of the United 
     States required to help ensure the Nation's national 
     security, homeland security, and economic security.
       ``(dd) Whether institutions of higher education in the 
     United States are expected to produce enough graduates with 
     degrees to meet the future national security, homeland 
     security, and economic security needs of the United States.
       ``(II) The Secretary, in consultation with the Secretary of 
     Defense, the Secretary of the Department of Homeland 
     Security, and the Secretary of State, shall develop, update 
     not less than once every 2 years, and publish in the Federal 
     Register, a list of foreign language degrees, majors, 
     certificates, or programs that if pursued by a student, may 
     enable the student to receive the increased Federal Pell 
     Grant amount under clause (i). In developing and updating the 
     list the Secretaries shall consider the following:
       ``(aa) The foreign language needs of the United States with 
     respect to national security, homeland security, and economic 
     security.
       ``(bb) Whether institutions of higher education in the 
     United States are currently producing enough graduates with 
     degrees to meet the national security, homeland security, and 
     economic security needs of the United States.
       ``(cc) The future expected workforce needs of the United 
     States required to help ensure the Nation's national 
     security, homeland security, and economic security.
       ``(dd) Whether institutions of higher education in the 
     United States are expected to produce enough graduates with 
     degrees to meet the future national security, homeland 
     security, and economic security needs of the United States.
       ``(iii) Each student who received an increased Federal Pell 
     Grant amount under clause (i) to pursue a degree, major, 
     certificate, or program described in a list published under 
     subclause (I) or (II) of clause (ii) shall continue to be 
     eligible for the increased Federal Pell Grant amount in 
     subsequent academic years if the degree, major, certificate, 
     or program, respectively, is subsequently removed from the 
     list.
       ``(iv)(I) If a student who received an increased Federal 
     Pell Grant amount under clause (i) changes the student's 
     course of study to a degree, major, certificate, or program 
     that is not included in a list described in clause (ii), then 
     the Secretary shall reduce the amount of Federal Pell Grant 
     assistance the student is eligible to receive under this 
     section for subsequent academic years by an amount equal to 
     the difference between the total amount the student received 
     under this subparagraph and the total amount the student 
     would have received under this section if this subparagraph 
     had not been applied.
       ``(II) The Secretary shall reduce the amount of Federal 
     Pell Grant assistance the student is eligible to receive in 
     subsequent academic years by dividing the total amount to be 
     reduced under subclause (I) for the student by the number of 
     years the student received an increased Federal Pell Grant 
     amount under clause (i), and deducting the result from the 
     amount of Federal Pell Grant assistance the student is 
     eligible to receive under this section for a number of 
     subsequent academic years equal to the number of academic 
     years the student received an increased Federal Pell Grant 
     amount under clause (i).''.


[[Page 10548]]

  Mr. LIEBERMAN. Mr. President, I rise today to join my esteemed 
colleague from the State of Virginia, Senator Warner, in introducing 
The 21st Century Pell Grant Plus Act. This bill is intended to provide 
an immediate and direct response to the urgent need in this country to 
encourage greater numbers of graduates in the critical areas of math 
and science and foreign language. Specifically, our bill would provide 
financial incentives to American college students, via enhanced Pell 
grants, to pursue degrees in science, engineering, mathematics, and key 
foreign languages. These subject areas are critical for meeting our 
nation's economic and homeland security needs.
  Although the number of jobs requiring scientific and technical skills 
is projected to grow over the next decade, the last ten years have 
witnessed a significant decline in the number of relevant baccalaureate 
degrees awarded by U.S. institutions of higher education. Recent 
reports have highlighted the decline in science and engineering 
graduates in our country, which has threatened the United States' 
worldwide dominance in science and innovation. Foreign advances in 
basic science now often exceed those in the United States. To 
exacerbate the matter, future demographics signal that many of the 
presently employed engineers and scientists who entered the workforce 
in the 1960s and 1970s will retire during the next decade. 
Unfortunately, their children are not following them into the same 
professions.
  Many of our competitors in the world market are not experiencing 
these same problems. The universities in some European and Asian 
countries are attracting science and engineering majors at much higher 
rates than the universities in the United States. For example, China 
graduated three times as many engineering graduates than the United 
States did in 1999. In 2000, there were 24 nations who awarded a higher 
percentage of science and engineering degrees than the United States 
did. In that same year, the percentage of students earning science 
degrees in Finland was 2.5 times higher than in the United States. 
Graduate education trends are no better. According to National Science 
Foundation indicators, between 1986 and 1999, China produced science 
and engineering doctorates at an average annual growth rate of 36.5 
percent. By comparison, the United States had an average annual growth 
rate of just 2.2 percent during the same period. We must also keep in 
mind that of all the science and engineering doctoral degrees earned in 
the United States in 1999, 48.6 percent of them were earned by non-U.S. 
citizens.
  I noted in my recent offshore outsourcing study, now posted on my 
website, that as global competition for technical talent intensifies, 
our economic security depends on producing U.S.-born science and 
engineering graduates. Not being able to fill the jobs in this country 
with U.S. citizens is also a threat to our national security. Thus, it 
is imperative that our higher education system, which is the best in 
the world, train more individuals in science and technology.
  Our bill provides a simple and efficient solution to this problem. 
Under our proposal, any student who qualifies for a Pell Grant and 
majors in science, engineering, mathematics, or certain foreign 
languages would be eligible to receive a grant that is double the size 
of the original award. Every two years the Secretary of Education, in 
consultation with the Secretaries of Defense and Homeland Security, and 
the director of the National Science Foundation will develop a list of 
engineering, mathematics, science, and foreign language majors, 
degrees, certificates, or programs that if pursued by a student, may 
enable that student to receive the increased Federal Pell Grant amount.
  Science, engineering, technology, and innovation are key to our 
economic growth, prosperity, and security. The 21st Century Federal 
Pell Grant Plus Act aims to strengthen our technical workforce, and 
thus our economic and homeland security, by encouraging more of our 
college students to study science, engineering, mathematics, and 
foreign languages. I urge my colleagues to act favorably on this 
measure.
  I would also like to take this opportunity to pay tribute to a man 
who some have appropriately described as a true gentleman as well as an 
outstanding leader in engineering and science. Dr. John H. Hopps died 
on May 14, 2004 at 65 years of age. He has advised my office on our 
nation's science talent issues for the past three years, and I want to 
dedicate today's new bill to him. At the time of his death, he was 
serving as Deputy Under Secretary of Defense for Research and National 
Laboratories, and Deputy Director of Defense Research and Engineering. 
He accepted this dual position out of a strong sense of national 
service after the September 11 attack. The science community has lost a 
member who has served as an inspiration to many, including members of 
my staff, for his commitment to his profession and his unique 
approaches to developing our technical workforce. Among his many 
achievements, including many in University education and at NSF, I 
would note that Dr. Hopps was the author of numerous scholarly and 
scientific papers, and was recognized as one of the top African 
Americans in Technology in 2004. I might also mention that in addition 
to his intellectual prowess, he was passionate about athletics--a 
winning combination. As we introduce this bill to highlight the 
importance of this profession, I thought it was appropriate to 
recognize Dr. Hopps, and thank my colleagues for this opportunity.
                                 ______
                                 
      By Mr. COLEMAN (for himself and Mrs. Feinstein):
  S. 2464. A bill to amend the Federal Food, Drug, and Cosmetic Act 
with respect to the sale of prescription drugs through the Internet; to 
the Committee on Health, Education, Labor, and Pensions.
                                  ____

      By Mr. COLEMAN:
  S. 2465. A bill to amend the Controlled Substances Act with respect 
to the seizure of shipments of controlled substances, and for other 
purposes; to the Committee on the Judiciary.
  Mr. COLEMAN. Mr. President, I rise to introduce two bills that expand 
Federal authority to prevent controlled substances from flooding into 
the U.S., authorizing states to shut down illegitimate virtual 
pharmacies, and bar Internet drug stores from dispensing drugs to 
customers referred to on-line doctors for a prescription.
  Americans are increasingly turning to the Internet for access to 
affordable drugs. In 2003, consumer spending on drugs procured over the 
Internet exceeded $3.2 billion. Unfortunately, rogue Internet sites 
have proliferated and rake in millions of dollars by selling unproven, 
counterfeit, defective or otherwise inappropriate medications to 
unsuspecting consumers. Even more dangerously, these sites are 
profiting by selling addictive and potentially deadly controlled 
substances to consumers without a prescription or any physician 
oversight. This must stop before more individuals die or become 
addicted to easily obtainable narcotic drugs.
  The first bill I am introducing was developed in close consultation 
with Senator Feinstein, who is an original cosponsor. In appreciation 
for her role in helping write this legislation it is named after a 
young man from her state who died from an overdose of drugs purchased 
over the Internet.
  17-year old Ryan Haight of La Mesa, CA was an honor roll student, and 
avid baseball card collector about to enter college. As his mom says, 
``he was a good kid.'' But in May of 2000 Ryan started hanging out with 
a different crowd of friends. He joined an online chat forum, which 
advocates the safe use of drugs, and he began buying prescription drugs 
from the Internet.
  He used the family computer late at night and a debit card his 
parents gave him to buy baseball cards on Ebay. You might ask, how did 
a healthy 17-year old obtain prescriptions for painkillers without a 
medical exam. He got them from Dr. Robert Ogle an ``online'' physician 
based out of Texas. With the prescriptions from Dr. Ogle, Ryan was able 
to order hydrocodone, morphine,

[[Page 10549]]

Valium and Oxazepam and have them shipped via US mail right to his 
front door.
  In February 2001, Ryan overdosed on a combination of these 
prescription drugs. His mother found him dead on his bedroom floor.
  The Ryan Haight Internet Pharmacy Consumer Protection Act counters 
the growing sale of prescription drugs over the Internet without a 
valid prescription by 1. providing new disclosure standards for 
Internet pharmacies; 2. barring Internet sites from selling or 
dispensing prescription drugs to consumers who are provided a 
prescription solely on the basis of an online questionnaire; and 3. 
allowing State Attorneys General to go to Federal court to shut down 
rogue sites.
  The bill is geared to counter domestic Internet pharmacies that sell 
drugs without a valid prescription, not international pharmacies that 
sell drugs at a low cost to individuals who have a valid prescription 
from their U.S. doctors.
  Under current law, purchasing drugs online without a valid 
prescription can be simple: a consumer just types the name of the drug 
into a search engine, quickly identifies a site selling the medication, 
fills in a brief questionnaire, and then clicks to purchase. The risks 
of self-medicating, however, can include potential adverse reactions 
from inappropriately prescribed medications, dangerous drug 
interactions, use of counterfeit or tainted products, and addiction to 
habit-forming substances. Several of these illegitimate sites fail to 
provide information about contraindications, potential adverse effects, 
and efficacy.
  Regulating these Internet pharmacies is difficult for Federal and 
State authorities. State medical and pharmacy boards have expressed the 
concern that they do not have adequate enforcement tools to regulate 
practice over the Internet. It can be virtually impossible for States 
to identify, investigate, and prosecute these illegal pharmacies 
because the consumer, prescriber, and seller of a drug may be located 
in different States.
  The Internet Pharmacy Consumer Protection Act amends the Federal 
Food, Drug, and Cosmetic Act to address this problem in three steps. 
First, it requires Internet pharmacy websites to display information 
identifying the business, pharmacist, and physician associated with the 
website.
  Second, the bill bars the selling or dispensing of a prescription 
drug via the Internet when the website has referred the customer to a 
doctor who then writes a prescription without ever seeing the patient.
  Third, the bill provides States with new enforcement authority 
modeled on the Federal Telemarketing Sales Act that will allow a state 
attorney general to shut down a rogue site across the country, rather 
than only bar sales to consumers of his or her state.
  I am proud to say that the Ryan Haight Internet Pharmacy Consumer 
Protection Act is supported by the Federation of State Medical Boards, 
the National Community Pharmacists Association, and the American 
Pharmacists Association.
  The second bill I am introducing enables Customs and Border 
Protection to immediately seize and destroy any package containing a 
controlled substance that is illegally imported into the U.S. without 
having to fill out duplicative forms and other unnecessary 
administrative paperwork. The Act will allow Customs to focus on 
interdicting and destroying potentially addictive and deadly controlled 
substances. The Act is dedicated to Todd Rode, a young man who died 
after overdosing on imported drugs.
  Todd Rode had the heart and soul of a musician. He graduated from 
college magna cum laude with a major in psychology and a minor in 
music. The faculty named him the outstanding senior in the Psychology 
Department. He worked in this field for a number of years, but he 
constantly fought bouts of depression and anxiety.
  Unfortunately Todd ordered controlled drugs from a pharmacy and 
doctor in another country. These drugs included Venlafaxine, 
Propoxyphene, and Codeine. All were controlled substances and all were 
obtained from overseas pharmacies without any safeguards. To obtain 
these controlled substances all Todd had to do was to fill out an 
online questionnaire and with the click of a mouse they were shipped 
directly to his front door.
  In October of 1999, Todd's family found him dead in his apartment.
  A six-month investigation by the Permanent Subcommittee on 
Investigations has revealed that tens of thousands of dangerous and 
addictive controlled substances are streaming into the U.S. on a daily 
basis from overseas Internet pharmacies. For example, on March 15 and 
17, 2004, at JFK airport, home to the largest International Mail Branch 
in the U.S., at least 3,000 boxes from a single vendor in the 
Netherlands containing hydro-
codone and Diazepam (Valium) were seized by Customs and Border 
Protection (Customs).
  In fact, senior Customs inspectors at JFK estimate that 40,000 
parcels containing drugs are imported on a daily basis. During last 
summer's FDA/Customs blitz, 28 percent of the drugs tested were 
controlled substances. Extrapolating these figures, 11,200 drug parcels 
containing controlled substances are imported through JFK daily, 78,400 
weekly, 313,600 monthly and 3,763,200 annually. top countries of origin 
include Brazil, India, Pakistan, Netherlands, Spain, Portugal, Canada, 
Mexico, and Romania.
  Likewise, as of March 2003, senior Customs officials at the Miami 
International Airport indicated that as much as 30,000 packages 
containing drugs were being imported on a daily basis. A large 
percentage of these are controlled substances as well. Customs is 
simply overwhelmed. At Mail facilities across the U.S., Customs 
regularly seizes shipments of oxycodone, hydroquinone, tranquilizers, 
steroids, codeine laced products, GHB, date rape drug, and morphine.
  In order to comply with paperwork requirements, Customs is forced to 
devote investigators solely to opening, counting, and analyzing drug 
packages, filling out duplicative forms, and logging into a computer 
all of the seized controlled substances. It takes Customs at least one 
hour to process a single shipment of a controlled substance. This 
minimizes the availability of inspectors to screen incoming drug 
packages. In fact, currently at JFK, there are 20,000 packages of 
seized controlled substances waiting processing. Customs acknowledges 
that, because of the sheer volume of product, bureaucratic regulations, 
and lack of manpower, the vast majority of controlled substances that 
are illegally imported are simply missed and allowed into the U.S. 
stream of commerce.
  The Act to Prevent the Illegal Importation of Controlled Substances 
is a simple bill to address this burgeoning and potentially lethal 
problem.
  I am confident that, if enacted as stand-alone measures, each of 
these bills will make on-line drug purchasing safer. However, I am 
working with Senator Gregg to ensure these safety features are included 
in his comprehensive reimportation bill and urge my colleagues to help 
make sure that this important piece of legislation becomes law this 
year.
  Mrs. FEINSTEIN. Mr. President, I rise today along with my colleague 
Senator Coleman to introduce the Internet Pharmacy Consumer Protection 
Act also called the ``Ryan Haight Act'', a bill which is vital to 
protect the safety of Americans who choose to purchase their 
prescription drugs legally over the Internet.
  This legislation is necessary because of a growing problem of illegal 
prescription drug diversion and abuse of prescription drugs. Coupled 
with the ease of access to the Internet, it has led to an environment 
where illegitimate pharmacy websites can bypass traditional regulations 
and established safeguards for the sale of prescription drugs. Internet 
websites that allow consumers to obtain prescription drugs without the 
existence of a bona fide physician-patient relationship pose an 
immediate threat to public health and safety.
  To address this problem, the Internet Pharmacy Consumer Protection 
Act makes several critical steps to ensure

[[Page 10550]]

safety and to assist regulatory authorities in shutting down ``rogue'' 
Internet pharmacies.
  First, this bill establishes disclosure standards for Internet 
pharmacies.
  Second, this bill prohibits the dispensing or sale of a prescription 
drug based solely on communications via the Internet such as the 
completion of an online medical questionnaire.
  Third, it allows a State Attorney General to bring a civil action in 
a federal district court to enjoin a pharmacy operation and to enforce 
compliance with the provisions of this law.
  Under this bill, for a domestic website to sell prescription drugs 
legally, the website would have to display identifying information such 
as the names, addresses, and medical licensing information for 
pharmacists and physicians associated with the website.
  In addition, if a person wants to use the Internet to purchase their 
prescription drugs he or she will not be prohibited from doing so under 
this bill but, in order to do so, must already have a prescription for 
the drug that is valid in the United States prior to making the 
Internet purchase.
  Reliance on the Internet for public health purposes and the expansion 
of telemedicine, particularly in rural areas, make it essential that 
there be at the very least a minimum standard for what qualifies as an 
acceptable medical relationship between patients and their physicians.
  According to the American Medical Association, a health care 
practitioner who offers a prescription for a patient he or she has 
never seen before, based solely on an online questionnaire, generally 
does not meet the appropriate medical standard of care.
  Let me illustrate the situation facing our country today. If a 
physician's office prescribed and dispensed prescription drugs the same 
way Internet pharmacies currently can and do, it would look something 
like this: A physician opens a physical office, asks a patient to fill 
out a medical history questionnaire in the lobby and give his or her 
credit card information to the office manager. There is no nurse, and 
therefore no one to take the patients' height, weight, blood pressure, 
verify his or her medical history, and so forth and no one to answer 
the patient's questions regarding their health.
  The questionnaire is then slipped through a hole in the window; the 
office manager takes it to the physician, or person acting as the 
physician, who then writes the prescription and hands it to the 
pharmacist, or person acting as the pharmacist, in the next room. Once 
the patient signs his credit card, he is on his way out the door, drugs 
in hand.
  No examination is performed, no questions asked, and no verification 
or clarification of the answers provided on the medical history 
questionnaire.
  This illustration is not an exaggeration. It occurs every day all 
across the United States. The National Association of Boards of 
Pharmacy estimates that there are around 500 identifiable rogue 
pharmacy websites operating on the Internet.
  According to the Federation of State Medical Boards, approximately 29 
states and the District of Columbia either have laws or medical board 
initiatives addressing Internet medical practice. Of the other 21 
States, 13 have medical or osteopathic medical boards that have taken 
disciplinary action against a physician for prescribing medication 
online.
  Many States have already enacted laws defining acceptable practices 
for qualifying medical relationships between doctors and patients and 
this bill would not affect any existing State laws.
  For example, California law was changed in 2000 to say:

       No person or entity may prescribe, dispense, or furnish, or 
     cause to be prescribed, dispensed, or furnished dangerous 
     drugs or dangerous devices [defined as any drug or device 
     unsafe for self-use] on the Internet for delivery to any 
     person in this state, without a good faith prior examination 
     and medical indication . . .

  I believe California's law is a perfect example of why this 
legislation is needed. The law only applies to persons living in 
California. As we all know, however, the Internet is not bound by State 
or even country borders.
  This legislation makes a critical step forward by providing 
additional authority for State Attorneys General to file an injunction 
in Federal court to shut down an Internet site operating in another 
State that violates the provisions in the bill.
  Under current law, in order to close down an Internet website selling 
prescription drugs prosecutors must take enforcement actions in every 
State where the Internet pharmacy operates, requiring a tremendous 
amount of resources in an environment where the location of the website 
is difficult, if not impossible, to determine or keep track of.
  This bill will allow a State Attorney General to bring a civil action 
in a Federal district court to enjoin a pharmacy operation and to 
enforce compliance with the provisions of the law in every jurisdiction 
where the pharmacy is operating.
  While this legislation pertains to domestic Internet pharmacies, the 
practice of international pharmacies selling low-cost drugs to U.S. 
consumers who have valid prescriptions from their doctors deserves to 
be discussed and debated on the Senate floor. It is my hope that the 
Senate will act this year on prescription drug importation legislation.
  In closing, I want to share with you the story of Ryan T. Haight of 
La Mesa, CA in whose memory this bill is named.
  Ryan was an 18-year old honor student from La Mesa, CA, when he died 
in his home on February 12, 2001. His parents found a bottle of Vicodin 
in his room with a label from an out-of-state pharmacy.
  It turns out that Ryan had been ordering addictive drugs online and 
paying with a debit card his parents gave him to buy baseball cards on 
eBay.
  Without a physical exam or his parents' consent, Ryan had been 
obtaining controlled substances, some from an Internet site in 
Oklahoma. It only took a few months before Ryan's life was ended by an 
overdose on a cocktail of painkillers.
  Ryan's story and others like it force us to ask why anyone in the 
U.S. would be able to access such highly addictive and dangerous drugs 
over the Internet with such ease?
  Why was there no physician or pharmacist on the other end of this 
teenager's computer verifying his age, his medical history and that 
there was a valid prescription?
  That is why I support this legislation. It makes sensible 
requirements of Internet pharmacy websites that will not impact access 
to convenient, oftentimes cost-saving drugs.
   With simple disclosure requirements for Internet sites such as 
names, addresses and medical or pharmacy licensing information, 
patients will be better off and state medical and pharmacy boards can 
ensure that pharmacists and doctors are properly licensed.
  Lastly, this bill will give State Attorneys General the authority 
they need to shut down rogue Internet pharmacies operating in other 
States. I urge my colleagues to support this bill.
                                 ______
                                 
      By Mr. BROWNBACK (for himself, Mr. Alexander, Mr. Bunning, Mr. 
        Burns, Mr. Coleman, Mr. Crapo, Mr. DeWine, Mr. Ensign, Mr. 
        Enzi, Mr. Fitzgerald, Mr. Graham of South Carolina, Mr. 
        Grassley, Mr. Hatch, Mr. Kyl, Mr. McConnell, Mr. Miller, Mr. 
        Nickles, Mr. Roberts, Mr. Santorum, Mr. Sessions, Mr. Shelby, 
        Mr. Talent, Mr. Chambliss, and Mr. Inhofe):
  S. 2466. A bill to ensure that women seeking an abortion are fully 
informed regarding the pain experienced by their unborn child; to the 
Committee on Health, Education, Labor, and Pensions.
  Mr. BROWNBACK. Mr. President, I rise today to introduce the 
bipartisan Unborn Child Pain Awareness Act, and I am joined by 22 
original cosponsors.
  Unborn children can experience pain, and they can certainly respond 
to touch from outside the womb. Any woman who has been blessed with 
carrying a baby in the second trimester can tell you this.

[[Page 10551]]

  I remember my own children kicking and squirming inside of my wife's 
womb. And my wife certainly remembers feeling their kicks. That unborn 
child is very much alive. All along, women have been able to feel the 
child inside of them, but now, science is telling us what the child 
inside of his or her mother can feel.
  Many among us are unaware of the scientific, medical fact that unborn 
children can feel, but it is true. Not only can they feel, but their 
ability to experience pain is heightened. The highest density of pain 
receptors per square inch of skin in human development occurs in utero 
from 20 to 30 weeks gestation.
  An expert report on fetal development, prepared for the Partial Birth 
Abortion Ban trials, notes that while unborn children are obviously 
incapable of verbal expressions, we know that they can experience pain 
based upon anatomical, functional, physiological and behavioral 
indicators that are correlated with pain in children and adults.
  Unborn children can experience pain. This is why unborn children are 
often administered anesthesia during in utero surgeries.
  Think about the pain that unborn children can experience, and then 
think about the more gruesome abortion procedures. Of course, we have 
heard about Partial Birth Abortion, but also consider the D&E abortion. 
During this procedure, commonly performed after 20-weeks--when there is 
medical evidence that the child can experience severe pain--the child 
is torn apart limb from limb. Think about how that must feel to a young 
human.
  We would never allow a dog to be treated this way. Yet, the creature 
we are talking about is a young, unborn child.
  Fortunately, the issue of pain experienced by unborn children has 
been covered by the news media during the ongoing Partial Birth 
Abortion Ban trials. Take for instance an April 7, 2004 Associated 
Press news article covering the trials. And I quote: ``A type of 
abortion banned under a new federal law would cause `severe and 
excruciating' pain to 20-week-old fetuses, a medical expert testified 
yesterday . . . `I believe the fetus is conscious,' said Dr. Kanwaljeet 
`Sonny' Anand, a pediatrician at the University of Arkansas for Medical 
Sciences . . . said yesterday that fetuses show increased heart rate, 
blood flow, and hormone levels in response to pain. `The physiological 
responses have been very clearly studied,' he said. `The fetus cannot 
talk . . . so this is the best evidence we can get.''
  Today I introduce a bill that would require those who perform 
abortions on unborn children 20 weeks after fertilization to inform the 
woman seeking an abortion of the medical evidence that the unborn child 
feels pain: (a.) Through a verbal statement given by the abortion 
provider, and also (b.) by providing a brochure--developed by the 
Department of Health and Human Services--that goes into more detail 
than the verbal statement on the medical evidence of pain experienced 
by an unborn child 20 weeks after fertilization.
  The bill would also ensure that the woman, if she chooses to continue 
with the abortion procedure after being given the medical information, 
has the option of choosing anesthesia for the child, so that the unborn 
child's pain is less severe.
  Women should not be kept in the dark; women have the right to know 
what their unborn child experiences during an abortion. After being 
presented with the medical and scientific information on the 
development of the unborn child 20 weeks after fertilization, the woman 
is more aware of the pain experienced by the child during an abortion 
procedure, and able--at the very least--to make an informed decision. 
It is simply not fair to keep women in the dark.
  Unborn children do not have a voice, but they are young members of 
the human family. It is time to look at the unborn child, and recognize 
that it is really a young human, who can feel pain and should be 
treated with care.
  I urge my colleagues to support and pass this important piece of 
legislation.
                                 ______
                                 
      By Ms. COLLINS (for herself, Mr. Carper, Mr. Stevens, Mr. 
        Voinovich, Mr. Sununu, Mr. Lieberman, Mr. Akaka, and Mr. 
        Durbin):
  S. 2468. A bill to reform the postal laws of the United States; to 
the Committee on Governmental Affairs.
  Ms. COLLINS. Mr. President, I rise today with my friend and 
colleague, Senator Carper, to introduce the Postal Accountability and 
Enhancement Act of 2004, a bill designed to help the 225-year-old 
Postal Service meet the challenges of the 21st Century. This 
legislation represents the culmination of a process that began in the 
summer of 2002 when I introduced a bill to establish a Presidential 
Commission charged with examining the problems the Postal Service 
faces, and developing specific recommendations and legislative 
proposals that Congress and the Postal Service could implement.
  It has long been acknowledged that the financial and operational 
problems confronting the Postal Service are serious. At present, the 
Postal Service has more than $90 billion in unfunded liabilities and 
obligations, which include $6.5 billion in debt to the U.S. Treasury, 
nearly $7 billion for Workers' Compensation claims, $5 billion for 
retirement costs, and as much as $45 billion to cover retiree health 
care costs. The General Accounting Office's Comptroller General, David 
Walker, has pointed to the urgent need for ``fundamental reforms to 
minimize the risk of a significant taxpayer bailout or dramatic postal 
rate increases.'' The Postal Service has been on GAO's ``High-Risk'' 
List since April of 2001. The Postal Service is at risk of a ``death 
spiral'' of decreasing volume and increasing rates that lead to further 
decreases in volume.
  In December of 2003, President Bush announced the creation of a 
bipartisan commission charged with identifying the operational, 
structural, and financial challenges facing the U.S. Postal Service. 
The President charged this commission with examining all significant 
aspects of the Postal Service with the goal of recommending legislative 
and administrative reforms to ensure its long-term viability.
  The President's Commission conducted seven public hearings across the 
country at which they heard from numerous witnesses. On July 31, 2003, 
the Commission released its final report, making 35 legislative and 
administrative recommendations for the reform of the Postal Service.
  As I read through the Commission's report, I was struck by what I 
considered the Commission's wake up call to Congress: its statement 
that ``an incremental approach to Postal Service reform will yield too 
little, too late given the enterprise's bleak fiscal outlook, the depth 
of current debt and unfunded obligations, the downward trend in First-
Class mail volumes and the limited potential of its legacy postal 
network that was built for a bygone era.'' That is a very strong 
statement, and one that challenged both the Postal Service and Congress 
to embrace far-reaching reforms.
  To the relief of many, including myself, the Commission did not 
recommend privatization of the Postal Service. Instead, the Commission 
sought to find a way for the Postal Service to do, as Co-Chair Jim 
Johnson described to me, ``an overwhelmingly better job under the same 
general structure.''
  The Postal Service plays a vital role in our economy. The Service 
itself employs more than 750,000 career employees. Less well known is 
the fact that it is also the linchpin of a $900-billion mailing 
industry that employs 9 million Americans in fields as diverse as 
direct mailing, printing, catalog production, paper manufacturing, and 
financial services. The health of the Postal Service is essential to 
the vitality of thousands of companies and the millions that they 
employ.
  One of the greatest challenges for the Postal Service is the decrease 
in mail volume as business communications, bills and payments move more 
and more to the Internet. The Postal Service has experienced declining 
volumes

[[Page 10552]]

of First-Class mail for the past four years. This is highly 
significant, given that First-Class mail accounts for 48 percent of 
total mail volume, and the revenue it generates pays for more than two-
thirds of the Postal Service's institutional costs.
  The Postal Service also faces the difficult task of trying to cut 
costs from its nationwide infrastructure and transportation network. 
These costs are difficult to cut. Even though volumes may be 
decreasing, carriers must still deliver six days a week to more than 
139 million addresses.
  As Chairman of the Committee on Governmental Affairs, I held a series 
of eight hearings, including a joint hearing with the House, during 
which we reviewed the recommendations of the President's Commission. 
The bill Senator Carper and I introduce today is the culmination of 
everything the Committee learned from dozens of witnesses over the past 
eight months.
  First and foremost, the Collins-Carper bill preserves the basic 
features of universal service-affordable rates, frequent delivery, and 
convenient community access to retail postal services. As a Senator 
representing a large, rural State, I want to ensure that my 
constituents living in the northern woods, or on the islands, or in our 
many rural small towns have the same access to postal services as the 
people of our cities. If the Postal Service were no longer to provide 
universal service and deliver mail to every customer, the affordable 
communication link upon which many Americans rely would be jeopardized. 
Most commercial enterprises would find it uneconomical, if not 
impossible, to deliver mail and packages to rural Americans at rates 
charged by the Postal Service.
  The Collins-Carper bill allows the Postal Service to maintain its 
current mail monopoly, and retain its sole access to customer 
mailboxes. It grants the Postal Service Board of Governors the 
authority to set rates for competitive products like Express Mail and 
Parcel Post, as long as these prices do not result in cross subsidy 
from market-dominant products. As a safeguard, our bill establishes a 
30 day prior review period during which the proposed rate changes shall 
be reviewed by the Postal Regulatory Commission.
  It replaces the current lengthy and litigious rate-setting process 
with a rate cap-based structure for market-dominant products such as 
First-Class Mail, periodicals and library mail. This would allow the 
Postal Service to react more quickly to changes in the mailing 
industry. The rate caps would be linked to an inflation indicator 
selected by the Postal Regulatory Commission. The goal would be to make 
rate increases more predictable and less frequent and to provide 
incentives for the Postal Service to operate efficiently. Price changes 
for market-dominant products would be subject to a 45-day prior review 
period by the Postal Regulatory Commission.
  Our bill would introduce new safeguards against unfair competition by 
the Postal Service in competitive markets. Subsidization of competitive 
products by market-dominant products would be expressly forbidden, and 
an equitable allocation of institutional costs to competitive products 
would be required.
  The President's Commission recommended that the regulator be granted 
the authority to make changes to the Postal Service's universal service 
obligation and monopoly. The vast majority of the postal community, 
however, shared my belief that these are important policy 
determinations that should be retained by Congress. The Collins-Carper 
bill keeps those public policy decisions in congressional hands.
  The existing Postal Rate Commission would be transformed into the 
Postal Regulatory Commission with greatly enhanced authority. Under 
current law, the Rate Commission has very narrow authority. We wanted 
to ensure that the Postal Service management has both greater latitude 
and stronger oversight. Among other things, the Postal Regulatory 
Commission will have the authority to regulate rates for non-
competitive products and services; ensure financial transparency; 
establish limits on the accumulation of retained earnings by the Postal 
Service; obtain information from the Postal Service, if need be, 
through the use of new subpoena power; and review and act on complaints 
filed by those who believe the Postal Service has exceeded its 
authority. Members of the Postal Regulatory Board will be selected 
solely on the basis of their demonstrated experience and professional 
standing. Senate confirmation of all Board Members will be required.
  The Governmental Affairs Committee dedicated two hearings to the 
examination of the Commission's workforce-related recommendations. The 
Postal Service is a highly labor intensive organization, using $3 out 
of every $4 to pay the wages and benefits of its employees. Their 
workforce is comprised of more than 700,000 dedicated letter carriers, 
clerks, mail handlers, postmasters, and others, who place great value 
on their right to collectively bargain. Our bill reaffirms that right. 
This bill only makes changes to the bargaining process that have been 
agreed to by both the Postal Service and the four major unions. We 
replace the rarely used fact-finding process with mediation, and 
shorten statutory deadlines for certain phases of the bargaining 
process.
  Additionally, the Collins-Carper bill corrects what I believe to be 
an anomaly in the Federal workers' compensation law that results in 
high costs for the Postal Service. Under the Federal Employees 
Compensation Act (FECA), Federal employees with dependents are eligible 
for 75 percent of their take-home pay, tax free, plus cost of living 
allowances. In addition, there is no maximum dollar cap on FECA 
payments. As a result, employees often opt not to retire, staying on 
the more generous workers' compensation program permanently.
  According to a March 2003 audit issued by the Postal Service's Office 
of Inspector General, the Postal Service's workers' compensation rolls 
include 81 cases that originated 40 to 50 years ago, with the oldest 
recipient being 102 years old. The IG's office found 778 cases that 
originated 30 to 40 years ago; and 1,189 cases that originated 20 to 29 
years ago.
  The Collins-Carper bill works to protect the financial resources of 
the Postal Service by converting workers' compensation benefits for 
total or partial disability to a retirement annuity when the affected 
employee reaches 65 years of age. This change would reflect the fact 
that disabled postal employees would likely retire at some point were 
they not receiving workers' compensation. I would like to note that the 
average postal employee retires far earlier than age 65, so this is 
still a generous program. It is important to point out that the Postal 
Service has reduced their workplace injury rate by twenty-eight percent 
over the past three years.
  The Collins--Carper bill also puts into place a three-day waiting 
period before an employee is eligible to receive 45 days of 
continuation of pay. This is consistent with every state's workers' 
compensation program that requires a three- to seven-day waiting period 
before benefits are paid.
  Our bill has reached an important compromise on the issue of 
workshare discounts. Some have raised concerns that the Postal Service 
has set rates so that mailers get a discount greater than the cost 
avoided by the Postal Service. While this may have occurred in a 
handful of instances, those mailers are still covering their 
attributable costs, as well as making a healthy contribution to 
overhead. The language in our bill sets a policy that the Postal 
Service shall not create new discounts greater than the cost avoided by 
the Postal Service. The only exception is in those cases where the 
Postal Regulatory Commission believes those rates are necessary.
  The bill has also, for the first time, explicitly created the 
authority for the Postal Service to enter into negotiated service 
agreements with individual customers. This will allow the Postal 
Service to create agreements with customers to increase its revenue. I 
would point out that these agreements must cover all attributable 
costs, and will likely result in greater contribution to overhead. In 
addition, our bill requires

[[Page 10553]]

that other similarly situated mailers will be able to enter into such 
agreements with the Postal Service.
  Finally, our bill would repeal a provision of Public Law 108-18 which 
requires that money owed to the Postal Service due to an overpayment 
into the Civil Service Retirement System Fund be held in an escrow 
account. Repealing this provision would essentially ``free up'' $78 
billion over a period of 60 years. These savings would be used to not 
only pay off debt to the U.S. Treasury and to fund health care 
liabilities, but to mitigate rate increases as well. In fact, failure 
to release these escrow funds would mean, for mailers, a double-digit 
rate increase in 2006--an expense most American businesses and many 
consumers are ill-equipped to afford.
  The bill would also return to the Department of Treasury the 
responsibility for funding CSRS pension benefits relating to the 
military service of postal retirees. No other agency is required to 
make this payment. Ratepayers should not be held responsible for this 
$27 billion obligation.
  The Postal Service has reached a critical juncture. If we are to save 
and strengthen this vital service upon which so many Americans rely for 
communication and their livelihoods, the time to act is now.
  Our bill has the strong endorsements of the National Rural Letter 
Carriers Association, the National Association of Letter Carriers, the 
National Association of Postmasters of the United States, and the 
Coalition for a 21st Century Postal Service--which represents thousands 
of the major mailers, employee groups, small businesses, and other 
users of the mail. I am also very pleased to add Senators Ted Stevens, 
George Voinovich and John Sununu as originated cosponsors of this bill.
  I look forward to working with all of my colleagues in the Senate, 
and House Government Reform and Oversight Committee Chairman Tom Davis, 
who just last week passed a postal reform bill out of his committee by 
a vote of 40-0.
  I ask unanimous consent that the text of the bill be printed in the 
Record, along with a letter sent to me from David Walker, Comptroller 
General of the General Accounting Office, addressing the need for 
comprehensive postal reform.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2468

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Postal 
     Accountability and Enhancement Act''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                 TITLE I--DEFINITIONS; POSTAL SERVICES

Sec. 101. Definitions.
Sec. 102. Postal services.

                    TITLE II--MODERN RATE REGULATION

Sec. 201. Provisions relating to market-dominant products.
Sec. 202. Provisions relating to competitive products.
Sec. 203. Provisions relating to experimental and new products.
Sec. 204. Reporting requirements and related provisions.
Sec. 205. Complaints; appellate review and enforcement.
Sec. 206. Clerical amendment.

                  TITLE III--MODERN SERVICE STANDARDS

Sec. 301. Establishment of modern service standards.
Sec. 302. Postal service plan.

           TITLE IV--PROVISIONS RELATING TO FAIR COMPETITION

Sec. 401. Postal Service Competitive Products Fund.
Sec. 402. Assumed Federal income tax on competitive products income.
Sec. 403. Unfair competition prohibited.
Sec. 404. Suits by and against the Postal Service.

                      TITLE V--GENERAL PROVISIONS

Sec. 501. Qualification and term requirements for Governors.
Sec. 502. Obligations.
Sec. 503. Private carriage of letters.
Sec. 504. Rulemaking authority.
Sec. 505. Noninterference with collective bargaining agreements.

                TITLE VI--ENHANCED REGULATORY COMMISSION

Sec. 601. Reorganization and modification of certain provisions 
              relating to the Postal Regulatory Commission.
Sec. 602. Authority for Postal Regulatory Commission to issue 
              subpoenas.
Sec. 603. Appropriations for the Postal Regulatory Commission.
Sec. 604. Redesignation of the Postal Rate Commission.
Sec. 605. Financial transparency.

                         TITLE VII--EVALUATIONS

Sec. 701. Assessments of ratemaking, classification, and other 
              provisions.
Sec. 702. Report on universal postal service and the postal monopoly.
Sec. 703. Study on equal application of laws to competitive products.

   TITLE VIII--POSTAL SERVICE RETIREMENT AND HEALTH BENEFITS FUNDING

Sec. 801. Short title.
Sec. 802. Civil Service Retirement System.
Sec. 803. Health insurance.
Sec. 804. Repeal of disposition of savings provision.
Sec. 805. Effective dates.

                TITLE IX--COMPENSATION FOR WORK INJURIES

Sec. 901. Temporary disability; continuation of pay.
Sec. 902. Disability retirement for postal employees.

                 TITLE I--DEFINITIONS; POSTAL SERVICES

     SEC. 101. DEFINITIONS.

       Section 102 of title 39, United States Code, is amended by 
     striking ``and'' at the end of paragraph (3), by striking the 
     period at the end of paragraph (4) and inserting a semicolon, 
     and by adding at the end the following:
       ``(5) `postal service' refers to the physical delivery of 
     letters, printed matter, or packages weighing up to 70 
     pounds, including physical acceptance, collection, sorting, 
     transportation, or other services ancillary thereto;
       ``(6) `product' means a postal service with a distinct cost 
     or market characteristic for which a rate is applied;
       ``(7) `rates', as used with respect to products, includes 
     fees for postal services;
       ``(8) `market-dominant product' or `product in the market-
     dominant category of mail' means a product subject to 
     subchapter I of chapter 36; and
       ``(9) `competitive product' or `product in the competitive 
     category of mail' means a product subject to subchapter II of 
     chapter 36; and
       ``(10) `year', as used in chapter 36 (other than 
     subchapters I and VI thereof), means a fiscal year.''.

     SEC. 102. POSTAL SERVICES.

       (a) In General.--Section 404 of title 39, United States 
     Code, is amended--
       (1) in subsection (a), by striking paragraph (6) and by 
     redesignating paragraphs (7) through (9) as paragraphs (6) 
     through (8), respectively; and
       (2) by adding at the end the following:
       ``(c) Nothing in this title shall be considered to permit 
     or require that the Postal Service provide any special 
     nonpostal or similar services.''.
       (b) Conforming Amendments.--(1) Section 1402(b)(1)(B)(ii) 
     of the Victims of Crime Act of 1984 (98 Stat. 2170; 42 U.S.C. 
     10601(b)(1)(B)(ii)) is amended by striking ``404(a)(8)'' and 
     inserting ``404(a)(7)''.
       (2) Section 2003(b)(1) of title 39, United States Code, is 
     amended by striking ``and nonpostal''.

                    TITLE II--MODERN RATE REGULATION

     SEC. 201. PROVISIONS RELATING TO MARKET-DOMINANT PRODUCTS.

       (a) In General.--Chapter 36 of title 39, United States 
     Code, is amended by striking sections 3621, 3622, and 3623 
     and inserting the following:

     ``Sec. 3621. Applicability; definitions

       ``(a) Applicability.--This subchapter shall apply with 
     respect to--
       ``(1) first-class mail letters;
       ``(2) first-class mail cards;
       ``(3) periodicals;
       ``(4) standard mail;
       ``(5) single-piece parcel post;
       ``(6) media mail;
       ``(7) bound printed matter;
       ``(8) library mail;
       ``(9) special services; and
       ``(10) single-piece international mail,
     subject to any changes the Postal Regulatory Commission may 
     make under section 3642.
       ``(b) Rule of Construction.--Mail matter referred to in 
     subsection (a) shall, for purposes of this subchapter, be 
     considered to have the meaning given to such mail matter 
     under the mail classification schedule.

     ``Sec. 3622. Modern rate regulation

       ``(a) Authority Generally.--The Postal Regulatory 
     Commission shall, within 12 months after the date of the 
     enactment of this section, by regulation establish (and may 
     from time to time thereafter by regulation revise) a modern 
     system for regulating rates and classes for market-dominant 
     products.
       ``(b) Objectives.--Such system shall be designed to achieve 
     the following objectives:
       ``(1) To reduce the administrative burden and increase the 
     transparency of the ratemaking process.

[[Page 10554]]

       ``(2) To create predictability and stability in rates.
       ``(3) To maximize incentives to reduce costs and increase 
     efficiency.
       ``(4) To enhance mail security and deter terrorism by 
     promoting secure, sender-identified mail.
       ``(5) To allow the Postal Service pricing flexibility, 
     including the ability to use pricing to promote intelligent 
     mail and encourage increased mail volume during nonpeak 
     periods.
       ``(6) To assure adequate revenues, including retained 
     earnings, to maintain financial stability and meet the 
     service standards established under section 3691.
       ``(7) To allocate the total institutional costs of the 
     Postal Service equitably between market-dominant and 
     competitive products.
       ``(c) Factors.--In establishing or revising such system, 
     the Postal Regulatory Commission shall take into account--
       ``(1) the establishment and maintenance of a fair and 
     equitable schedule for rates and classification system;
       ``(2) the value of the mail service actually provided each 
     class or type of mail service to both the sender and the 
     recipient, including but not limited to the collection, mode 
     of transportation, and priority of delivery;
       ``(3) the direct and indirect postal costs attributable to 
     each class or type of mail service plus that portion of all 
     other costs of the Postal Service reasonably assignable to 
     such class or type;
       ``(4) the effect of rate increases upon the general public, 
     business mail users, and enterprises in the private sector of 
     the economy engaged in the delivery of mail matter other than 
     letters;
       ``(5) the available alternative means of sending and 
     receiving letters and other mail matter at reasonable costs;
       ``(6) the degree of preparation of mail for delivery into 
     the postal system performed by the mailer and its effect upon 
     reducing costs to the Postal Service;
       ``(7) simplicity of structure for the entire schedule and 
     simple, identifiable relationships between the rates or fees 
     charged the various classes of mail for postal services;
       ``(8) the relative value to the people of the kinds of mail 
     matter entered into the postal system and the desirability 
     and justification for special classifications and services of 
     mail;
       ``(9) the importance of providing classifications with 
     extremely high degrees of reliability and speed of delivery 
     and of providing those that do not require high degrees of 
     reliability and speed of delivery;
       ``(10) the desirability of special classifications from the 
     point of view of both the user and of the Postal Service;
       ``(11) the educational, cultural, scientific, and 
     informational value to the recipient of mail matter; and
       ``(12) the policies of this title as well as such other 
     factors as the Commission deems appropriate.
       ``(d) Requirements.--The system for regulating rates and 
     classes for market-dominant products shall--
       ``(1) require the Postal Rate Commission to set annual 
     limitations on the percentage changes in rates based on 
     inflation using indices, such as the Consumer Price Index, 
     the Employment Cost Index, the Gross Domestic Product Price 
     Index, or any similar measure as the Postal Rate Commission 
     may prescribe;
       ``(2) establish a schedule whereby rates, when necessary 
     and appropriate, would increase at regular intervals by 
     predictable amounts;
       ``(3) not later than 45 days before the implementation of 
     any adjustment in rates under this section--
       ``(A) require the Postal Service to provide public notice 
     of the adjustment;
       ``(B) provide an opportunity for review by the Postal Rate 
     Commission;
       ``(C) provide for the Postal Rate Commission to notify the 
     Postal Service of any noncompliance of the adjustment with 
     the limitation under paragraph (1); and
       ``(D) require the Postal Service to respond to the notice 
     provided under subparagraph (C) and describe the actions to 
     be taken to comply with the limitation under paragraph (1).
       ``(4) notwithstanding any limitation set under paragraphs 
     (1) and (3), establish procedures whereby rates may be 
     adjusted on an expedited basis due to unexpected and 
     extraordinary circumstances.
       ``(e) Workshare Discounts.--
       ``(1) Definition.--In this subsection, the term `workshare 
     discount' refers to rate discounts provided to mailers for 
     the presorting, prebarcoding, handling, or transportation of 
     mail, as further defined by the Postal Regulatory Commission 
     under subsection (a).
       ``(2) Regulations.--As part of the regulations established 
     under subsection (a), the Postal Regulatory Commission shall 
     establish rules for workshare discounts that ensure that such 
     discounts do not exceed the cost that the Postal Service 
     avoids as a result of workshare activity, unless--
       ``(A) the discount is--
       ``(i) associated with a new postal service or with a change 
     to an existing postal service; and
       ``(ii) necessary to induce mailer behavior that furthers 
     the economically efficient operation of the Postal Service;
       ``(B) a reduction in the discount would--
       ``(i) lead to a loss of volume in the affected category of 
     mail and reduce the aggregate contribution to institutional 
     costs of the Postal Service from the mail matter subject to 
     the discount below what it otherwise would have been if the 
     discount had not been reduced to costs avoided;
       ``(ii) result in a further increase in the rates paid by 
     mailers not able to take advantage of the discount; or
       ``(iii) impede the efficient operation of the Postal 
     Service;
       ``(C) the amount of the discount above costs avoided--
       ``(i) is necessary to mitigate rate shock; and
       ``(ii) will be phased out over time;
       ``(D) the workshare discount is provided in connection with 
     subclasses of mail consisting exclusively of mail matter of 
     educational, cultural, or scientific value; or
       ``(E) the Postal Regulatory Commission determines that such 
     discounts are reasonable and equitable and consistent with 
     the objectives and factors taken into account under 
     subsections (b) and (c).
       ``(3) Report.--Whenever the Postal Service establishes or 
     maintains a workshare discount, the Postal Service shall, at 
     the time it publishes the workshare discount rate, submit to 
     the Postal Regulatory Commission a detailed report and 
     explanation of the Postal Service's reasons for establishing 
     or maintaining the rate, setting forth the data, economic 
     analyses, and other information relied on by the Postal 
     Service to justify the rate.
       ``(f) Transition Rule.--Until regulations under this 
     section first take effect, rates and classes for market-
     dominant products shall remain subject to modification in 
     accordance with the provisions of this chapter and section 
     407, as such provisions were last in effect before the date 
     of the enactment of this section.

     ``Sec. 3623. Service agreements for market-dominant products

       ``(a) In General.--
       ``(1) Authority.--The Postal Service may enter into service 
     agreements with a customer or group of customers that provide 
     for the provision of postal services under terms, conditions, 
     or service standards that differ from those that would apply 
     under the otherwise applicable classification of market-
     dominant mail.
       ``(2) Agreements.--An agreement under this section may 
     involve--
       ``(A) performance by the contracting mail user of mail 
     preparation, processing, transportation, or other functions;
       ``(B) performance by the Postal Service of additional mail 
     preparation, processing, transportation, or other functions; 
     or
       ``(C) other terms and conditions that meet the requirements 
     of subsections (b) and (c).
       ``(b) Requirements.--A service agreement under this section 
     may be entered into only if each of the following conditions 
     is met:
       ``(1) The total revenue generated under the agreement--
       ``(A) will cover all Postal Service costs attributable to 
     the postal services covered by the agreement; and
       ``(B) will result in no less contribution to the 
     institutional costs of the Postal Service than would have 
     been generated had the agreement not been entered into.
       ``(2) Rates or fees for other mailers will not increase as 
     a result of the agreement.
       ``(3) The agreement pertains exclusively to products in the 
     market-dominant category of mail.
       ``(4) The agreement will not preclude or materially hinder 
     similarly situated mail users from entering into agreements 
     with the Postal Service on the same, or substantially the 
     same terms or conditions, and the Postal Service remains 
     willing and able to enter into such.
       ``(c) Limitations.--A service agreement under this section 
     shall--
       ``(1) be for a term not to exceed 3 years; and
       ``(2) provide that such agreement shall be subject to the 
     cancellation authority of the Commission under section 3662.
       ``(d) Notice Requirements.--
       ``(1) In general.--At least 30 days before a service 
     agreement under this section is to take effect, the Postal 
     Service shall file with the Postal Regulatory Commission and 
     publish in the Federal Register the following information 
     with respect to such agreement:
       ``(A) A description of the postal services the agreement 
     involves.
       ``(B) A description of the functions the customer is to 
     perform under the agreement.
       ``(C) A description of the functions the Postal Service is 
     to perform under the agreement.
       ``(D) The rates and fees payable by the customer during the 
     term of the agreement.
       ``(E) With respect to each condition under subsection (b), 
     information sufficient to demonstrate the bases for the view 
     of the Postal Service that such condition would be met.
       ``(2) Agreements less than national in scope.--In the case 
     of a service agreement under this section that is less than 
     national in scope, the information described under paragraph 
     (1) shall also be published by the

[[Page 10555]]

     Postal Service in a manner designed to afford reasonable 
     notice to persons within any geographic area to which such 
     agreement (or any amendment to that agreement) pertains.
       ``(e) Equal Treatment Required.--If the Postal Service 
     enters into a service agreement with a mailer under this 
     section, the Postal Service shall make such agreement 
     available to similarly situated mailers on functionally 
     equivalent terms and conditions consistent with the 
     regulatory system established under section 3622 without 
     unreasonable distinctions based on mailer profiles, provided 
     that such distinctions, if ignored, would not render any 
     subsequent agreement uneconomic or impractical.
       ``(f) Complaints.--Any person who believes that a service 
     agreement under this section is not in conformance with the 
     requirements of this section, or who is aggrieved by a 
     decision of the Postal Service not to enter into an agreement 
     under this section, may file a complaint with the Postal 
     Regulatory Commission in accordance with section 3662.
       ``(g) Postal Regulatory Commission Role.--
       ``(1) Regulations.--The Postal Regulatory Commission may 
     promulgate such regulations regarding service agreements as 
     the Commission determines necessary to implement the 
     requirements of this section.
       ``(2) Review.--The Postal Regulatory Commission may review 
     any agreement or proposed agreement under this section and 
     may suspend, cancel, or prevent such agreement if the 
     Commission finds that the agreement does not meet the 
     requirements of this section.
       ``(h) Interpretation.--The determination of whether the 
     revenue generated under the agreement meets the requirements 
     of subsection (b)(1)(B) shall be based, to the extent 
     practicable, on the actual contribution of the mail involved, 
     not on the average contribution made by the mail 
     classification most similar to the services performed under 
     the agreement. If mailer-specific data is not available, the 
     bases for the determination used shall be provided and shall 
     include a discussion of the suitability of the data used, in 
     accordance with regulations established by the Postal 
     Regulatory Commission.''.
       (b) Repealed Sections.--Sections 3624, 3625, and 3628 of 
     title 39, United States Code, are repealed.
       (c) Redesignation.--Chapter 36 of title 39, United States 
     Code (as in effect after the amendment made by section 601, 
     but before the amendment made by section 202) is amended by 
     striking the heading for subchapter II and inserting the 
     following:

   ``SUBCHAPTER I--PROVISIONS RELATING TO MARKET-DOMINANT PRODUCTS''.

     SEC. 202. PROVISIONS RELATING TO COMPETITIVE PRODUCTS.

       Chapter 36 of title 39, United States Code, is amended by 
     inserting after section 3629 the following:

      ``SUBCHAPTER II--PROVISIONS RELATING TO COMPETITIVE PRODUCTS

     ``Sec. 3631. Applicability; definitions and updates

       ``(a) Applicability.--This subchapter shall apply with 
     respect to--
       ``(1) priority mail;
       ``(2) expedited mail;
       ``(3) bulk parcel post;
       ``(4) bulk international mail; and
       ``(5) mailgrams;
     subject to subsection (d) and any changes the Postal 
     Regulatory Commission may make under section 3642.
       ``(b) Definition.--For purposes of this subchapter, the 
     term `costs attributable', as used with respect to a product, 
     means the direct and indirect postal costs attributable to 
     such product.
       ``(c) Rule of Construction.--Mail matter referred to in 
     subsection (a) shall, for purposes of this subchapter, be 
     considered to have the meaning given to such mail matter 
     under the mail classification schedule.
       ``(d) Limitation.--Notwithstanding any other provision of 
     this section, nothing in this subchapter shall be considered 
     to apply with respect to any product then currently in the 
     market-dominant category of mail.

     ``Sec. 3632. Action of the Governors

       ``(a) Authority To Establish Rates and Classes.--The 
     Governors, with the written concurrence of a majority of all 
     of the Governors then holding office, shall establish rates 
     and classes for products in the competitive category of mail 
     in accordance with the requirements of this subchapter and 
     regulations promulgated under section 3633.
       ``(b) Procedures.--
       ``(1) In general.--Rates and classes shall be established 
     in writing, complete with a statement of explanation and 
     justification, and the date as of which each such rate or 
     class takes effect.
       ``(2) Public notice; review; and compliance.--Not later 
     than 30 days before the date of implementation of any 
     adjustment in rates under this section--
       ``(A) the Governors shall provide public notice of the 
     adjustment and an opportunity for review by the Postal 
     Regulatory Commission;
       ``(B) the Postal Rate Commission shall notify the Governors 
     of any noncompliance of the adjustment with section 3633; and
       ``(C) the Governors shall respond to the notice provided 
     under subparagraph (B) and describe the actions to be taken 
     to comply with section 3633.
       ``(c) Transition Rule.--Until regulations under section 
     3633 first take effect, rates and classes for competitive 
     products shall remain subject to modification in accordance 
     with the provisions of this chapter and section 407, as such 
     provisions were as last in effect before the date of the 
     enactment of this section.

     ``Sec. 3633. Provisions applicable to rates for competitive 
       products

       ``The Postal Regulatory Commission shall, within 180 days 
     after the date of the enactment of this section, promulgate 
     (and may from time to time thereafter revise) regulations 
     to--
       ``(1) prohibit the subsidization of competitive products by 
     market-dominant products;
       ``(2) ensure that each competitive product covers its costs 
     attributable; and
       ``(3) ensure that all competitive products collectively 
     cover their share of the institutional costs of the Postal 
     Service.''.

     SEC. 203. PROVISIONS RELATING TO EXPERIMENTAL AND NEW 
                   PRODUCTS.

       Subchapter III of chapter 36 of title 39, United States 
     Code, is amended to read as follows:

 ``SUBCHAPTER III--PROVISIONS RELATING TO EXPERIMENTAL AND NEW PRODUCTS

     ``Sec. 3641. Market tests of experimental products

       ``(a) Authority.--
       ``(1) In general.--The Postal Service may conduct market 
     tests of experimental products in accordance with this 
     section.
       ``(2) Provisions waived.--A product shall not, while it is 
     being tested under this section, be subject to the 
     requirements of sections 3622, 3633, or 3642, or regulations 
     promulgated under those sections.
       ``(b) Conditions.--A product may not be tested under this 
     section unless it satisfies each of the following:
       ``(1) Significantly different product.--The product is, 
     from the viewpoint of the mail users, significantly different 
     from all products offered by the Postal Service within the 2-
     year period preceding the start of the test.
       ``(2) Market disruption.--The introduction or continued 
     offering of the product will not create an unfair or 
     otherwise inappropriate competitive advantage for the Postal 
     Service or any mailer, particularly in regard to small 
     business concerns (as defined under subsection (h)).
       ``(3) Correct categorization.--The Postal Service 
     identifies the product, for the purpose of a test under this 
     section, as either market-dominant or competitive, consistent 
     with the criteria under section 3642(b)(1). Costs and 
     revenues attributable to a product identified as competitive 
     shall be included in any determination under section 3633(3) 
     (relating to provisions applicable to competitive products 
     collectively). Any test that solely affects products 
     currently classified as competitive, or which provides 
     services ancillary to only competitive products, shall be 
     presumed to be in the competitive product category without 
     regard to whether a similar ancillary product exists for 
     market-dominant products.
       ``(c) Notice.--
       ``(1) In general.--At least 30 days before initiating a 
     market test under this section, the Postal Service shall file 
     with the Postal Regulatory Commission and publish in the 
     Federal Register a notice--
       ``(A) setting out the basis for the Postal Service's 
     determination that the market test is covered by this 
     section; and
       ``(B) describing the nature and scope of the market test.
       ``(2) Safeguards.--For a competitive experimental product, 
     the provisions of section 504(g) shall be available with 
     respect to any information required to be filed under 
     paragraph (1) to the same extent and in the same manner as in 
     the case of any matter described in section 504(g)(1). 
     Nothing in paragraph (1) shall be considered to permit or 
     require the publication of any information as to which 
     confidential treatment is accorded under the preceding 
     sentence (subject to the same exception as set forth in 
     section 504(g)(3)).
       ``(d) Duration.--
       ``(1) In general.--A market test of a product under this 
     section may be conducted over a period of not to exceed 24 
     months.
       ``(2) Extension authority.--If necessary in order to 
     determine the feasibility or desirability of a product being 
     tested under this section, the Postal Regulatory Commission 
     may, upon written application of the Postal Service (filed 
     not later than 60 days before the date as of which the 
     testing of such product would otherwise be scheduled to 
     terminate under paragraph (1)), extend the testing of such 
     product for not to exceed an additional 12 months.
       ``(e) Dollar-Amount Limitation.--
       ``(1) In general.--A product may only be tested under this 
     section if the total revenues that are anticipated, or in 
     fact received, by the Postal Service from such product do not 
     exceed $10,000,000 in any year, subject to paragraph (2) and 
     subsection (g).
       ``(2) Exemption authority.--The Postal Regulatory 
     Commission may, upon written application of the Postal 
     Service, exempt the market test from the limit in paragraph 
     (1) if the total revenues that are anticipated, or

[[Page 10556]]

     in fact received, by the Postal Service from such product do 
     not exceed $50,000,000 in any year, subject to subsection 
     (g). In reviewing an application under this paragraph, the 
     Postal Regulatory Commission shall approve such application 
     if it determines that--
       ``(A) the product is likely to benefit the public and meet 
     an expected demand;
       ``(B) the product is likely to contribute to the financial 
     stability of the Postal Service; and
       ``(C) the product is not likely to result in unfair or 
     otherwise inappropriate competition.
       ``(f) Cancellation.--If the Postal Regulatory Commission at 
     any time determines that a market test under this section 
     fails to meet 1 or more of the requirements of this section, 
     it may order the cancellation of the test involved or take 
     such other action as it considers appropriate. A 
     determination under this subsection shall be made in 
     accordance with such procedures as the Commission shall by 
     regulation prescribe.
       ``(g) Adjustment for Inflation.--For purposes of each year 
     following the year in which occurs the deadline for the 
     Postal Service's first report to the Postal Regulatory 
     Commission under section 3652(a), each dollar amount 
     contained in this section shall be adjusted by the change in 
     the Consumer Price Index for such year (as determined under 
     regulations of the Commission).
       ``(h) Definition of a Small Business Concern.--The criteria 
     used in defining small business concerns or otherwise 
     categorizing business concerns as small business concerns 
     shall, for purposes of this section, be established by the 
     Postal Regulatory Commission in conformance with the 
     requirements of section 3 of the Small Business Act.
       ``(i) Effective Date.--Market tests under this subchapter 
     may be conducted in any year beginning with the first year in 
     which occurs the deadline for the Postal Service's first 
     report to the Postal Regulatory Commission under section 
     3652(a).

     ``Sec. 3642. New products and transfers of products between 
       the market-dominant and competitive categories of mail

       ``(a) In General.--Upon request of the Postal Service or 
     users of the mails, or upon its own initiative, the Postal 
     Regulatory Commission may change the list of market-dominant 
     products under section 3621 and the list of competitive 
     products under section 3631 by adding new products to the 
     lists, removing products from the lists, or transferring 
     products between the lists.
       ``(b) Criteria.--All determinations by the Postal 
     Regulatory Commission under subsection (a) shall be made in 
     accordance with the following criteria:
       ``(1) The market-dominant category of products shall 
     consist of each product in the sale of which the Postal 
     Service exercises sufficient market power that it can 
     effectively set the price of such product substantially above 
     costs, raise prices significantly, decrease quality, or 
     decrease output, without risk of losing substantial business 
     to other firms offering similar products. The competitive 
     category of products shall consist of all other products.
       ``(2) Exclusion of products covered by postal monopoly.--A 
     product covered by the postal monopoly shall not be subject 
     to transfer under this section from the market-dominant 
     category of mail. For purposes of the preceding sentence, the 
     term `product covered by the postal monopoly' means any 
     product the conveyance or transmission of which is reserved 
     to the United States under section 1696 of title 18, subject 
     to the same exception as set forth in the last sentence of 
     section 409(e)(1).
       ``(3) Additional considerations.--In making any decision 
     under this section, due regard shall be given to--
       ``(A) the availability and nature of enterprises in the 
     private sector engaged in the delivery of the product 
     involved;
       ``(B) the views of those who use the product involved on 
     the appropriateness of the proposed action; and
       ``(C) the likely impact of the proposed action on small 
     business concerns (within the meaning of section 3641(h)).
       ``(c) Transfers of Subclasses and Other Subordinate Units 
     Allowable.--Nothing in this title shall be considered to 
     prevent transfers under this section from being made by 
     reason of the fact that they would involve only some (but not 
     all) of the subclasses or other subordinate units of the 
     class of mail or type of postal service involved (without 
     regard to satisfaction of minimum quantity requirements 
     standing alone).
       ``(d) Notification and Publication Requirements.--
       ``(1) Notification requirement.--The Postal Service shall, 
     whenever it requests to add a product or transfer a product 
     to a different category, file with the Postal Regulatory 
     Commission and publish in the Federal Register a notice 
     setting out the basis for its determination that the product 
     satisfies the criteria under subsection (b) and, in the case 
     of a request to add a product or transfer a product to the 
     competitive category of mail, that the product meets the 
     regulations promulgated by the Postal Regulatory Commission 
     under section 3633. The provisions of section 504(g) shall be 
     available with respect to any information required to be 
     filed.
       ``(2) Publication requirement.--The Postal Regulatory 
     Commission shall, whenever it changes the list of products in 
     the market-dominant or competitive category of mail, 
     prescribe new lists of products. The revised lists shall 
     indicate how and when any previous lists (including the lists 
     under sections 3621 and 3631) are superseded, and shall be 
     published in the Federal Register.
       ``(e) Prohibition.--Except as provided in section 3641, no 
     product that involves the physical delivery of letters, 
     printed matter, or packages may be offered by the Postal 
     Service unless it has been assigned to the market-dominant or 
     competitive category of mail (as appropriate) either--
       ``(1) under this subchapter; or
       ``(2) by or under any other provision of law.''.

     SEC. 204. REPORTING REQUIREMENTS AND RELATED PROVISIONS.

       (a) Redesignation.--Chapter 36 of title 39, United States 
     Code (as in effect before the amendment made by subsection 
     (b)) is amended--
       (1) by striking the heading for subchapter IV and inserting 
     the following:

``SUBCHAPTER V--POSTAL SERVICES, COMPLAINTS, AND JUDICIAL REVIEW''; and

       (2) by striking the heading for subchapter V and inserting 
     the following:

                      ``SUBCHAPTER VI--GENERAL''.

       (b) Reports and Compliance.--Chapter 36 of title 39, United 
     States Code, is amended by inserting after subchapter III the 
     following:

     ``SUBCHAPTER IV--REPORTING REQUIREMENTS AND RELATED PROVISIONS

     ``Sec. 3651. Annual reports by the Commission

       ``(a) In General.--The Postal Regulatory Commission shall 
     submit an annual report to the President and the Congress 
     concerning the operations of the Commission under this title, 
     including the extent to which regulations are achieving the 
     objectives under sections 3622, 3633, and 3691.
       ``(b) Information From Postal Service.--The Postal Service 
     shall provide the Postal Regulatory Commission with such 
     information as may, in the judgment of the Commission, be 
     necessary in order for the Commission to prepare its reports 
     under this section.

     ``Sec. 3652. Annual reports to the Commission

       ``(a) Costs, Revenues, Rates, and Service.--Except as 
     provided in subsection (c), the Postal Service shall, no 
     later than 90 days after the end of each year, prepare and 
     submit to the Postal Regulatory Commission a report (together 
     with such nonpublic annex to the report as the Commission may 
     require under subsection (e))--
       ``(1) which shall analyze costs, revenues, rates, and 
     quality of service in sufficient detail to demonstrate that 
     all products during such year complied with all applicable 
     requirements of this title; and
       ``(2) which shall, for each market-dominant product 
     provided in such year, provide--
       ``(A) product information, including mail volumes; and
       ``(B) measures of the service afforded by the Postal 
     Service in connection with such product, including--
       ``(i) the level of service (described in terms of speed of 
     delivery and reliability) provided; and
       ``(ii) the degree of customer satisfaction with the service 
     provided.

     Before submitting a report under this subsection (including 
     any annex to the report and the information required under 
     subsection (b)), the Postal Service shall have the 
     information contained in such report (and annex) audited by 
     the Inspector General. The results of any such audit shall be 
     submitted along with the report to which it pertains.
       ``(b) Information Relating to Workshare Discounts.--The 
     Postal Service shall include, in each report under subsection 
     (a), the following information with respect to each market-
     dominant product for which a workshare discount was in effect 
     during the period covered by such report:
       ``(1) The per-item cost avoided by the Postal Service by 
     virtue of such discount.
       ``(2) The percentage of such per-item cost avoided that the 
     per-item workshare discount represents.
       ``(3) The per-item contribution made to institutional 
     costs.
       ``(c) Service Agreements and Market Tests.--In carrying out 
     subsections (a) and (b) with respect to service agreements 
     (including service agreements entered into under section 
     3623) and experimental products offered through market tests 
     under section 3641 in a year, the Postal Service--
       ``(1) may report summary data on the costs, revenues, and 
     quality of service by service agreement and market test; and
       ``(2) shall report such data as the Postal Regulatory 
     Commission requires.
       ``(d) Supporting Matter.--The Postal Regulatory Commission 
     shall have access, in accordance with such regulations as the 
     Commission shall prescribe, to the working papers and any 
     other supporting matter of the Postal Service and the 
     Inspector General in connection with any information 
     submitted under this section.
       ``(e) Content and Form of Reports.--
       ``(1) In general.--The Postal Regulatory Commission shall, 
     by regulation, prescribe the content and form of the public 
     reports

[[Page 10557]]

     (and any nonpublic annex and supporting matter relating to 
     the report) to be provided by the Postal Service under this 
     section. In carrying out this subsection, the Commission 
     shall give due consideration to--
       ``(A) providing the public with timely, adequate 
     information to assess the lawfulness of rates charged;
       ``(B) avoiding unnecessary or unwarranted administrative 
     effort and expense on the part of the Postal Service; and
       ``(C) protecting the confidentiality of commercially 
     sensitive information.
       ``(2) Revised requirements.--The Commission may, on its own 
     motion or on request of an interested party, initiate 
     proceedings (to be conducted in accordance with regulations 
     that the Commission shall prescribe) to improve the quality, 
     accuracy, or completeness of Postal Service data required by 
     the Commission under this subsection whenever it shall appear 
     that--
       ``(A) the attribution of costs or revenues to products has 
     become significantly inaccurate or can be significantly 
     improved;
       ``(B) the quality of service data has become significantly 
     inaccurate or can be significantly improved; or
       ``(C) such revisions are, in the judgment of the 
     Commission, otherwise necessitated by the public interest.
       ``(f) Confidential Information.--
       ``(1) In general.--If the Postal Service determines that 
     any document or portion of a document, or other matter, which 
     it provides to the Postal Regulatory Commission in a 
     nonpublic annex under this section or under subsection (d) 
     contains information which is described in section 410(c) of 
     this title, or exempt from public disclosure under section 
     552(b) of title 5, the Postal Service shall, at the time of 
     providing such matter to the Commission, notify the 
     Commission of its determination, in writing, and describe 
     with particularity the documents (or portions of documents) 
     or other matter for which confidentiality is sought and the 
     reasons therefor.
       ``(2) Treatment.--Any information or other matter described 
     in paragraph (1) to which the Commission gains access under 
     this section shall be subject to paragraphs (2) and (3) of 
     section 504(g) in the same way as if the Commission had 
     received notification with respect to such matter under 
     section 504(g)(1).
       ``(g) Other Reports.--The Postal Service shall submit to 
     the Postal Regulatory Commission, together with any other 
     submission that the Postal Service is required to make under 
     this section in a year, copies of its then most recent--
       ``(1) comprehensive statement under section 2401(e);
       ``(2) strategic plan under section 2802;
       ``(3) performance plan under section 2803; and
       ``(4) program performance reports under section 2804.

     ``Sec. 3653. Annual determination of compliance

       ``(a) Opportunity for Public Comment.--After receiving the 
     reports required under section 3652 for any year, the Postal 
     Regulatory Commission shall promptly provide an opportunity 
     for comment on such reports by users of the mails, affected 
     parties, and an officer of the Commission who shall be 
     required to represent the interests of the general public.
       ``(b) Determination of Compliance or Noncompliance.--Not 
     later than 90 days after receiving the submissions required 
     under section 3652 with respect to a year, the Postal 
     Regulatory Commission shall make a written determination as 
     to--
       ``(1) whether any rates or fees in effect during such year 
     (for products individually or collectively) were not in 
     compliance with applicable provisions of this chapter (or 
     regulations promulgated thereunder); or
       ``(2) whether any service standards in effect during such 
     year were not met.

     If, with respect to a year, no instance of noncompliance is 
     found under this subsection to have occurred in such year, 
     the written determination shall be to that effect.
       ``(c) If Any Noncompliance Is Found.--If, for a year, a 
     timely written determination of noncompliance is made under 
     subsection (b), the Postal Regulatory Commission shall take 
     any appropriate remedial action authorized by section 
     3662(c).
       ``(d) Rebuttable Presumption.--A timely written 
     determination described in the last sentence of subsection 
     (b) shall, for purposes of any proceeding under section 3662, 
     create a rebuttable presumption of compliance by the Postal 
     Service (with regard to the matters described in paragraphs 
     (1) through (3) of subsection (b)) during the year to which 
     such determination relates.''.

     SEC. 205. COMPLAINTS; APPELLATE REVIEW AND ENFORCEMENT.

       Chapter 36 of title 39, United States Code, is amended by 
     striking sections 3662 and 3663 and inserting the following:

     ``Sec. 3662. Rate and service complaints

       ``(a) In General.--Interested persons (including an officer 
     of the Postal Regulatory Commission representing the 
     interests of the general public) who believe the Postal 
     Service is not operating in conformance with the requirements 
     of chapter 1, 4, or 6, or this chapter (or regulations 
     promulgated under any of those chapters) may lodge a 
     complaint with the Postal Regulatory Commission in such form 
     and manner as the Commission may prescribe.
       ``(b) Prompt Response Required.--
       ``(1) In general.--The Postal Regulatory Commission shall, 
     within 90 days after receiving a complaint under subsection 
     (a), either--
       ``(A) begin proceedings on such complaint; or
       ``(B) issue an order dismissing the complaint (together 
     with a statement of the reasons therefor).
       ``(2) Treatment of complaints not timely acted on.--For 
     purposes of section 3663, any complaint under subsection (a) 
     on which the Commission fails to act in the time and manner 
     required by paragraph (1) shall be treated in the same way as 
     if it had been dismissed under an order issued by the 
     Commission on the last day allowable for the issuance of such 
     order under paragraph (1).
       ``(c) Action Required If Complaint Found To Be Justified.--
     If the Postal Regulatory Commission finds the complaint to be 
     justified, it shall order that the Postal Service take such 
     action as the Commission considers appropriate in order to 
     achieve compliance with the applicable requirements and to 
     remedy the effects of any noncompliance including ordering 
     unlawful rates to be adjusted to lawful levels, ordering the 
     cancellation of market tests, ordering the Postal Service to 
     discontinue providing loss-making products, and requiring the 
     Postal Service to make up for revenue shortfalls in 
     competitive products.
       ``(d) Authority To Order Fines in Cases of Deliberate 
     Noncompliance.--In addition, in cases of deliberate 
     noncompliance by the Postal Service with the requirements of 
     this title, the Postal Regulatory Commission may order, based 
     on the nature, circumstances, extent, and seriousness of the 
     noncompliance, a fine (in the amount specified by the 
     Commission in its order) for each incidence of noncompliance. 
     Fines resulting from the provision of competitive products 
     shall be paid out of the Competitive Products Fund 
     established in section 2011. All receipts from fines imposed 
     under this subsection shall be deposited in the general fund 
     of the Treasury of the United States.

     ``Sec. 3663. Appellate review

       ``A person, including the Postal Service, adversely 
     affected or aggrieved by a final order or decision of the 
     Postal Regulatory Commission may, within 30 days after such 
     order or decision becomes final, institute proceedings for 
     review thereof by filing a petition in the United States 
     Court of Appeals for the District of Columbia. The court 
     shall review the order or decision in accordance with section 
     706 of title 5, and chapter 158 and section 2112 of title 28, 
     on the basis of the record before the Commission.

     ``Sec. 3664. Enforcement of orders

       ``The several district courts have jurisdiction 
     specifically to enforce, and to enjoin and restrain the 
     Postal Service from violating, any order issued by the Postal 
     Regulatory Commission.''.

     SEC. 206. CLERICAL AMENDMENT.

       Chapter 36 of title 39, United States Code, is amended by 
     striking the heading and analysis for such chapter and 
     inserting the following:

           ``CHAPTER 36--POSTAL RATES, CLASSES, AND SERVICES

    ``SUBCHAPTER I--PROVISIONS RELATING TO MARKET-DOMINANT PRODUCTS

``Sec.
``3621. Applicability; definitions.
``3622. Modern rate regulation.
``3623. Service agreements for market-dominant products.
``[3624. Repealed.]
``[3625. Repealed.]
``3626. Reduced Rates.
``3627. Adjusting free rates.
``[3628. Repealed.]
``3629. Reduced rates for voter registration purposes.

      ``SUBCHAPTER II--PROVISIONS RELATING TO COMPETITIVE PRODUCTS

``3631. Applicability; definitions and updates.
``3632. Action of the Governors.
``3633. Provisions applicable to rates for competitive products.
``3634. Assumed Federal income tax on competitive products.

 ``SUBCHAPTER III--PROVISIONS RELATING TO EXPERIMENTAL AND NEW PRODUCTS

``3641. Market tests of experimental products.
``3642. New products and transfers of products between the market-
              dominant and competitive categories of mail.

     ``SUBCHAPTER IV--REPORTING REQUIREMENTS AND RELATED PROVISIONS

``3651. Annual reports by the Commission.
``3652. Annual reports to the Commission.
``3653. Annual determination of compliance.

    ``SUBCHAPTER V--POSTAL SERVICES, COMPLAINTS, AND JUDICIAL REVIEW

``3661. Postal Services.
``3662. Rate and service complaints.
``3663. Appellate review.
``3664. Enforcement of orders.

                        ``SUBCHAPTER VI--GENERAL

``3681. Reimbursement.

[[Page 10558]]

``3682. Size and weight limits.
``3683. Uniform rates for books; films, other materials.
``3684. Limitations.
``3685. Filing of information relating to periodical publications.
``3686. Bonus authority.

               ``SUBCHAPTER VII--MODERN SERVICE STANDARDS

``3691. Establishment of modern service standards.''.

                  TITLE III--MODERN SERVICE STANDARDS

     SEC. 301. ESTABLISHMENT OF MODERN SERVICE STANDARDS.

       Chapter 36 of title 39, United States Code, as amended by 
     this Act, is further amended by adding at the end the 
     following:

               ``SUBCHAPTER VII--MODERN SERVICE STANDARDS

     ``Sec. 3691. Establishment of modern service standards

       ``(a) Authority Generally.--The Postal Regulatory 
     Commission shall, within 12 months after the date of the 
     enactment of this section, by regulation establish (and may 
     from time to time thereafter by regulation revise) a set of 
     service standards for market-dominant products consistent 
     with sections 101 (a) and (b) and 403.
       ``(b) Objectives.--Such standards shall be designed to 
     achieve the following objectives:
       ``(1) To enhance and preserve the value of postal services 
     to both senders and recipients.
       ``(2) To provide a system of objective external performance 
     measurements for each market-dominant product as a basis for 
     measurement of Postal Service performance.
       ``(3) To guarantee Postal Service customers delivery 
     reliability, speed and frequency consistent with reasonable 
     rates and best business practices.
       ``(c) Factors.--In establishing or revising such standards, 
     the Postal Regulatory Commission shall take into account--
       ``(1) the actual level of service that Postal Service 
     customers receive under any service guidelines previously 
     established by the Postal Service or service standards 
     established under this section;
       ``(2) the degree of customer satisfaction with Postal 
     Service performance in the acceptance, processing and 
     delivery of mail;
       ``(3) mail volume and revenues projected for future years;
       ``(4) the projected growth in the number of addresses the 
     Postal Service will be required to serve in future years;
       ``(5) the current and projected future cost of serving 
     Postal Service customers;
       ``(6) the effect of changes in technology, demographics and 
     population distribution on the efficient and reliable 
     operation of the postal delivery system; and
       ``(7) the policies of this title as well as such other 
     factors as the Commission determines appropriate.''.

     SEC. 302. POSTAL SERVICE PLAN.

       (a) In General.--Within 6 months after the establishment of 
     the service standards under section 3691 of title 39, United 
     States Code, as added by this Act, the Postal Service shall, 
     in consultation with the Postal Regulatory Commission, 
     develop and submit to Congress a plan for meeting those 
     standards.
       (b) Content.--The plan under this section shall--
       (1) establish performance goals;
       (2) describe any changes to the Postal Service's 
     processing, transportation, delivery, and retail networks 
     necessary to allow the Postal Service to meet the performance 
     goals; and
       (3) describe any changes to planning and performance 
     management documents previously submitted to Congress to 
     reflect new performance goals.
       (c) Postal Facilities.--The Postal Service plan shall 
     include a description of its long-term vision for 
     rationalizing its infrastructure and workforce and how it 
     intends to implement that vision, including--
       (1) a strategy for how it intends to rationalize the postal 
     facilities network and remove excess processing capacity and 
     space from the network, including estimated timeframes, 
     criteria and processes to be used for making changes to the 
     facilities network, and the process for engaging policy 
     makers and the public in related decisions;
       (2) an update on how postal decisions related to mail 
     changes, security, automation initiatives, worksharing, 
     information technology systems, and other areas will impact 
     network rationalization plans;
       (3) a discussion of what impact any facility changes may 
     have on the postal workforce and whether the Postal Service 
     has sufficient flexibility to make needed workforce changes; 
     and
       (4) an identification of anticipated costs, cost savings, 
     and other benefits associated with the infrastructure 
     rationalization alternatives discussed in the plan.
       (d) Alternate Retail Options.--The Postal Service plan 
     shall include plans to expand and market retail access to 
     postal services, in addition to post offices, including--
       (1) vending machines;
       (2) the Internet;
       (3) Postal Service employees on delivery routes; and
       (4) retail facilities in which overhead costs are shared 
     with private businesses and other government agencies.
       (e) Reemployment Assistance and Retirement Benefits.--The 
     Postal Service plan shall include--
       (1) a plan under which reemployment assistance shall be 
     afforded to employees displaced as a result of the automation 
     or privatization of any of its functions or the closing and 
     consolidation of any of its facilities; and
       (2) a plan, developed in consultation with the Office of 
     Personnel Management, to offer early retirement benefits.
       (f) Inspector General Report.--
       (1) In general.--Before submitting the plan under this 
     section to Congress, the Postal Service shall submit the plan 
     to the Inspector General of the United States Postal Service 
     in a timely manner to carry out this subsection.
       (2) Report.--The Inspector General shall prepare a report 
     describing the extent to which the Postal Service plan--
       (A) is consistent with the continuing obligations of the 
     Postal Service under title 39, United States Code; and
       (B) provides for the Postal Service to meet the service 
     standards established under section 3691.
       (3) Submission of report.--The Postal Service shall submit 
     the report of the Inspector General under this subsection 
     with the plan submitted to Congress under subsection (a).

           TITLE IV--PROVISIONS RELATING TO FAIR COMPETITION

     SEC. 401. POSTAL SERVICE COMPETITIVE PRODUCTS FUND.

       (a) Provisions Relating to Postal Service Competitive 
     Products Fund and Related Matters.--
       (1) In general.--Chapter 20 of title 39, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 2011. Provisions relating to competitive products

       ``(a) There is established in the Treasury of the United 
     States a revolving fund, to be called the Postal Service 
     Competitive Products Fund, which shall be available to the 
     Postal Service without fiscal year limitation for the payment 
     of--
       ``(1) costs attributable to competitive products; and
       ``(2) all other costs incurred by the Postal Service, to 
     the extent allocable to competitive products.

     For purposes of this subsection, the term `costs 
     attributable' has the meaning given such term by section 
     3631.
       ``(b) There shall be deposited in the Competitive Products 
     Fund, subject to withdrawal by the Postal Service--
       ``(1) revenues from competitive products;
       ``(2) amounts received from obligations issued by the 
     Postal Service under subsection (e);
       ``(3) interest and dividends earned on investments of the 
     Competitive Products Fund; and
       ``(4) any other receipts of the Postal Service (including 
     from the sale of assets), to the extent allocable to 
     competitive products.
       ``(c) If the Postal Service determines that the moneys of 
     the Competitive Products Fund are in excess of current needs, 
     it may invest such amounts as it considers appropriate in 
     accordance with regulations which the Secretary of the 
     Treasury shall prescribe within 12 months after the date of 
     enactment of the Postal Accountability and Enhancement Act.
       ``(d) The Postal Service may, in its sole discretion, 
     provide that moneys of the Competitive Products Fund be 
     deposited in a Federal Reserve bank or a depository for 
     public funds.
       ``(e)(1) Subject to the limitations specified in section 
     2005(a), the Postal Service is authorized to borrow money and 
     to issue and sell such obligations as it determines necessary 
     to provide for competitive products and deposit such amounts 
     in the Competitive Products Fund, except that the Postal 
     Service may pledge only assets related to the provision of 
     competitive products (as determined under subsection (h) or, 
     for purposes of any period before accounting practices and 
     principles under subsection (h) have been established and 
     applied, the best information available from the Postal 
     Service, including the audited statements required by section 
     2008(e)), and the revenues and receipts from such products, 
     for the payment of the principal of or interest on such 
     obligations, for the purchase or redemption thereof, and for 
     other purposes incidental thereto, including creation of 
     reserve, sinking, and other funds which may be similarly 
     pledged and used, to such extent and in such manner as the 
     Postal Service determines necessary or desirable.
       ``(2) The Postal Service may enter into binding covenants 
     with the holders of such obligations, and with the trustee, 
     if any, under any agreement entered into in connection with 
     the issuance thereof with respect to--
       ``(A) the establishment of reserve, sinking, and other 
     funds;
       ``(B) application and use of revenues and receipts of the 
     Competitive Products Fund;
       ``(C) stipulations concerning the subsequent issuance of 
     obligations or the execution of leases or lease purchases 
     relating to properties of the Postal Service; and
       ``(D) such other matters as the Postal Service considers 
     necessary or desirable to enhance the marketability of such 
     obligations.

[[Page 10559]]

       ``(3) Obligations issued by the Postal Service under this 
     subsection--
       ``(A) may not be purchased by the Secretary of the 
     Treasury;
       ``(B) shall not be exempt either as to principal or 
     interest from any taxation now or hereafter imposed by any 
     State or local taxing authority;
       ``(C) shall not be obligations of, nor shall payment of the 
     principal thereof or interest thereon be guaranteed by, the 
     Government of the United States, and the obligations shall so 
     plainly state; and
       ``(D) notwithstanding the provisions of the Federal 
     Financing Bank Act of 1973 or any other provision of law 
     (except as specifically provided by reference to this 
     subparagraph in a law enacted after this subparagraph takes 
     effect), shall not be eligible for purchase by, commitment to 
     purchase by, or sale or issuance to, the Federal Financing 
     Bank.
       ``(4)(A) This paragraph applies with respect to the period 
     beginning on the date of the enactment of this paragraph and 
     ending at the close of the 5-year period which begins on the 
     date on which the Postal Service makes its submission under 
     subsection (h)(1).
       ``(B) During the period described in subparagraph (A), 
     nothing in subparagraph (A) or (D) of paragraph (3) or the 
     last sentence of section 2006(b) shall, with respect to any 
     obligations sought to be issued by the Postal Service under 
     this subsection, be considered to affect such obligations' 
     eligibility for purchase by, commitment to purchase by, or 
     sale or issuance to, the Federal Financing Bank.
       ``(C) The Federal Financing Bank may elect to purchase such 
     obligations under such terms, including rates of interest, as 
     the Bank and the Postal Service may agree, but at a rate of 
     yield no less than the prevailing yield on outstanding 
     marketable securities of comparable maturity issued by 
     entities with the same credit rating as the rating then most 
     recently obtained by the Postal Service under subparagraph 
     (D), as determined by the Bank.
       ``(D) In order to be eligible to borrow under this 
     paragraph, the Postal Service shall first obtain a credit 
     rating from a nationally recognized credit rating 
     organization. Such rating--
       ``(i) shall be determined taking into account only those 
     assets and activities of the Postal Service which are 
     described in section 3634(a)(2) (relating to the Postal 
     Service's assumed taxable income from competitive products); 
     and
       ``(ii) may, before final rules of the Postal Regulatory 
     Commission under subsection (h) are issued (or deemed to have 
     been issued), be based on the best information available from 
     the Postal Service, including the audited statements required 
     by section 2008(e).
       ``(f) The receipts and disbursements of the Competitive 
     Products Fund shall be accorded the same budgetary treatment 
     as is accorded to receipts and disbursements of the Postal 
     Service Fund under section 2009a.
       ``(g) A judgment against the Postal Service or the 
     Government of the United States (or settlement of a claim) 
     shall, to the extent that it arises out of activities of the 
     Postal Service in the provision of competitive products, be 
     paid out of the Competitive Products Fund.
       ``(h)(1) The Postal Service, in consultation with an 
     independent, certified public accounting firm and such other 
     advisors as it considers appropriate, shall develop 
     recommendations regarding--
       ``(A) the accounting practices and principles that should 
     be followed by the Postal Service with the objectives of 
     identifying the capital and operating costs incurred by the 
     Postal Service in providing competitive products, and 
     preventing the cross-subsidization of such products by 
     market-dominant products; and
       ``(B) the substantive and procedural rules that should be 
     followed in determining the Postal Service's assumed Federal 
     income tax on competitive products income for any year 
     (within the meaning of section 3634).

     Such recommendations shall be submitted to the Postal 
     Regulatory Commission no later than 12 months after the 
     effective date of this section.
       ``(2)(A) Upon receiving the recommendations of the Postal 
     Service under paragraph (1), the Commission shall give 
     interested parties, including the Postal Service, enterprises 
     in the private sector of the economy engaged in the delivery 
     of mail matter other than letters, users of the mails, and an 
     officer of the Commission who shall be required to represent 
     the interests of the general public, an opportunity to 
     present their views on those recommendations through 
     submission of written data, views, or arguments with or 
     without opportunity for oral presentation, or in such other 
     manner as the Commission considers appropriate.
       ``(B) After due consideration of the views and other 
     information received under subparagraph (A), the Commission 
     shall by rule--
       ``(i) provide for the establishment and application of the 
     accounting practices and principles which shall be followed 
     by the Postal Service;
       ``(ii) provide for the establishment and application of the 
     substantive and procedural rules described in paragraph 
     (1)(B); and
       ``(iii) provide for the submission by the Postal Service to 
     the Postal Regulatory Commission of annual and other periodic 
     reports setting forth such information as the Commission may 
     require.
     Final rules under this subparagraph shall be issued not later 
     than 12 months after the date on which the Postal Service 
     makes its submission to the Commission under paragraph (1) 
     (or by such later date as the Commission and the Postal 
     Service may agree to). If final rules are not issued by the 
     Commission by the deadline under the preceding sentence, the 
     recommendations submitted by the Postal Service under 
     paragraph (1) shall be treated as the final rules. The 
     Commission is authorized to promulgate regulations revising 
     such rules.
       ``(C) Reports described in subparagraph (B)(iii) shall be 
     submitted at such time and in such form, and shall include 
     such information, as the Commission by rule requires. The 
     Commission may, on its own motion or on request of an 
     interested party, initiate proceedings (to be conducted in 
     accordance with such rules as the Commission shall prescribe) 
     to improve the quality, accuracy, or completeness of Postal 
     Service data under such subparagraph whenever it shall appear 
     that--
       ``(i) the quality of the information furnished in those 
     reports has become significantly inaccurate or can be 
     significantly improved; or
       ``(ii) such revisions are, in the judgment of the 
     Commission, otherwise necessitated by the public interest.
       ``(D) A copy of each report described in subparagraph 
     (B)(iii) shall also be transmitted by the Postal Service to 
     the Secretary of the Treasury and the Inspector General of 
     the United States Postal Service.
       ``(i) The Postal Service shall render an annual report to 
     the Secretary of the Treasury concerning the operation of the 
     Competitive Products Fund, in which it shall address such 
     matters as risk limitations, reserve balances, allocation or 
     distribution of moneys, liquidity requirements, and measures 
     to safeguard against losses. A copy of its then most recent 
     report under this subsection shall be included with any other 
     submission that it is required to make to the Postal 
     Regulatory Commission under section 3652(g).''.
       (2) Clerical amendment.--The analysis for chapter 20 of 
     title 39, United States Code, is amended by adding after the 
     item relating to section 2010 the following:

``2011. Provisions relating to competitive products.''.

       (b) Technical and Conforming Amendments.--
       (1) Definition.--Section 2001 of title 39, United States 
     Code, is amended by striking ``and'' at the end of paragraph 
     (1), by redesignating paragraph (2) as paragraph (3), and by 
     inserting after paragraph (1) the following:
       ``(2) `Competitive Products Fund' means the Postal Service 
     Competitive Products Fund established by section 2011; and''.
       (2) Capital of the postal service.--Section 2002(b) of 
     title 39, United States Code, is amended by striking 
     ``Fund,'' and inserting ``Fund and the balance in the 
     Competitive Products Fund,''.
       (3) Postal service fund.--
       (A) Purposes for which available.--Section 2003(a) of title 
     39, United States Code, is amended by striking ``title.'' and 
     inserting ``title (other than any of the purposes, functions, 
     or powers for which the Competitive Products Fund is 
     available).''.
       (B) Deposits.--Section 2003(b) of title 39, United States 
     Code, is amended by striking ``There'' and inserting ``Except 
     as otherwise provided in section 2011, there''.
       (4) Relationship between the treasury and the postal 
     service.--Section 2006 of title 39, United States Code, is 
     amended--
       (A) in subsection (b), by adding at the end the following: 
     ``Nothing in this chapter shall be considered to permit or 
     require the Secretary of the Treasury to purchase any 
     obligations of the Postal Service other than those issued 
     under section 2005.''; and
       (B) in subsection (c), by inserting ``under section 2005'' 
     before ``shall be obligations''.

     SEC. 402. ASSUMED FEDERAL INCOME TAX ON COMPETITIVE PRODUCTS 
                   INCOME.

       Subchapter II of chapter 36 of title 39, United States 
     Code, as amended by section 202, is amended by adding at the 
     end the following:

     ``Sec. 3634. Assumed Federal income tax on competitive 
       products income

       ``(a) Definitions.--For purposes of this section--
       ``(1) the term `assumed Federal income tax on competitive 
     products income' means the net income tax that would be 
     imposed by chapter 1 of the Internal Revenue Code of 1986 on 
     the Postal Service's assumed taxable income from competitive 
     products for the year; and
       ``(2) the term `assumed taxable income from competitive 
     products', with respect to a year, refers to the amount 
     representing what would be the taxable income of a 
     corporation under the Internal Revenue Code of 1986 for the 
     year, if--
       ``(A) the only activities of such corporation were the 
     activities of the Postal Service allocable under section 
     2011(h) to competitive products; and

[[Page 10560]]

       ``(B) the only assets held by such corporation were the 
     assets of the Postal Service allocable under section 2011(h) 
     to such activities.
       ``(b) Computation and Transfer Requirements.--The Postal 
     Service shall, for each year beginning with the year in which 
     occurs the deadline for the Postal Service's first report to 
     the Postal Regulatory Commission under section 3652(a)--
       ``(1) compute its assumed Federal income tax on competitive 
     products income for such year; and
       ``(2) transfer from the Competitive Products Fund to the 
     Postal Service Fund the amount of that assumed tax.
       ``(c) Deadline for Transfers.--Any transfer required to be 
     made under this section for a year shall be due on or before 
     the January 15th next occurring after the close of such 
     year.''.

     SEC. 403. UNFAIR COMPETITION PROHIBITED.

       (a) Specific Limitations.--Chapter 4 of title 39, United 
     States Code, is amended by adding after section 404 the 
     following:

     ``Sec. 404a. Specific limitations

       ``(a) Except as specifically authorized by law, the Postal 
     Service may not:
       ``(1) establish any rule or regulation (including any 
     standard) the effect of which is to preclude competition or 
     establish the terms of competition unless the Postal Service 
     demonstrates that the regulation does not create an unfair 
     competitive advantage for itself or any entity funded (in 
     whole or in part) by the Postal Service;
       ``(2) compel the disclosure, transfer, or licensing of 
     intellectual property to any third party (such as patents, 
     copyrights, trademarks, trade secrets, and proprietary 
     information); or
       ``(3) obtain information from a person that provides (or 
     seeks to provide) any product, and then offer any postal 
     service that uses or is based in whole or in part on such 
     information, without the consent of the person providing that 
     information, unless substantially the same information is 
     obtained (or obtainable) from an independent source or is 
     otherwise obtained (or obtainable).
       ``(b) The Postal Regulatory Commission shall prescribe 
     regulations to carry out this section.
       ``(c) Any party (including an officer of the Commission 
     representing the interests of the general public) who 
     believes that the Postal Service has violated this section 
     may bring a complaint in accordance with section 3662.''.
       (b) Conforming Amendments.--
       (1) General powers.--Section 401 of title 39, United States 
     Code, is amended by striking ``The'' and inserting ``Subject 
     to the provisions of section 404a, the''.
       (2) Specific powers.--Section 404(a) of title 39, United 
     States Code, is amended by striking ``Without'' and inserting 
     ``Subject to the provisions of section 404a, but otherwise 
     without''.
       (c) Clerical Amendment.--The analysis for chapter 4 of 
     title 39, United States Code, is amended by inserting after 
     the item relating to section 404 the following:

``404a. Specific limitations.''.

     SEC. 404. SUITS BY AND AGAINST THE POSTAL SERVICE.

       (a) In General.--Section 409 of title 39, United States 
     Code, is amended by striking subsections (d) and (e) and 
     inserting the following:
       ``(d)(1) For purposes of the provisions of law cited in 
     paragraphs (2)(A) and (2)(B), respectively, the Postal 
     Service--
       ``(A) shall be considered to be a `person', as used in the 
     provisions of law involved; and
       ``(B) shall not be immune under any other doctrine of 
     sovereign immunity from suit in Federal court by any person 
     for any violation of any of those provisions of law by any 
     officer or employee of the Postal Service.
       ``(2) This subsection applies with respect to--
       ``(A) the Act of July 5, 1946 (commonly referred to as the 
     `Trademark Act of 1946' (15 U.S.C. 1051 and following)); and
       ``(B) the provisions of section 5 of the Federal Trade 
     Commission Act to the extent that such section 5 applies to 
     unfair or deceptive acts or practices.
       ``(e)(1) To the extent that the Postal Service, or other 
     Federal agency acting on behalf of or in concert with the 
     Postal Service, engages in conduct with respect to any 
     product which is not reserved to the United States under 
     section 1696 of title 18, the Postal Service or other Federal 
     agency (as the case may be)--
       ``(A) shall not be immune under any doctrine of sovereign 
     immunity from suit in Federal court by any person for any 
     violation of Federal law by such agency or any officer or 
     employee thereof; and
       ``(B) shall be considered to be a person (as defined in 
     subsection (a) of the first section of the Clayton Act) for 
     purposes of--
       ``(i) the antitrust laws (as defined in such subsection); 
     and
       ``(ii) section 5 of the Federal Trade Commission Act to the 
     extent that such section 5 applies to unfair methods of 
     competition.

     For purposes of the preceding sentence, any private carriage 
     of mail allowable by virtue of section 601 shall not be 
     considered a service reserved to the United States under 
     section 1696 of title 18.
       ``(2) No damages, interest on damages, costs or attorney's 
     fees may be recovered under the antitrust laws (as so 
     defined) from the Postal Service or any officer or employee 
     thereof acting in an official capacity for any conduct with 
     respect to a product in the market-dominant category of mail.
       ``(3) This subsection shall not apply with respect to 
     conduct occurring before the date of the enactment of this 
     subsection.
       ``(f) To the extent that the Postal Service engages in 
     conduct with respect to the provision of competitive 
     products, it shall be considered a person for the purposes of 
     the Federal bankruptcy laws.
       ``(g)(1) Each building constructed or altered by the Postal 
     Service shall be constructed or altered, to the maximum 
     extent feasible as determined by the Postal Service, in 
     compliance with 1 of the nationally recognized model building 
     codes and with other applicable nationally recognized codes.
       ``(2) Each building constructed or altered by the Postal 
     Service shall be constructed or altered only after 
     consideration of all requirements (other than procedural 
     requirements) of zoning laws, land use laws, and applicable 
     environmental laws of a State or subdivision of a State which 
     would apply to the building if it were not a building 
     constructed or altered by an establishment of the Government 
     of the United States.
       ``(3) For purposes of meeting the requirements of 
     paragraphs (1) and (2) with respect to a building, the Postal 
     Service shall--
       ``(A) in preparing plans for the building, consult with 
     appropriate officials of the State or political subdivision, 
     or both, in which the building will be located;
       ``(B) upon request, submit such plans in a timely manner to 
     such officials for review by such officials for a reasonable 
     period of time not exceeding 30 days; and
       ``(C) permit inspection by such officials during 
     construction or alteration of the building, in accordance 
     with the customary schedule of inspections for construction 
     or alteration of buildings in the locality, if such officials 
     provide to the Postal Service--
       ``(i) a copy of such schedule before construction of the 
     building is begun; and
       ``(ii) reasonable notice of their intention to conduct any 
     inspection before conducting such inspection.

     Nothing in this subsection shall impose an obligation on any 
     State or political subdivision to take any action under the 
     preceding sentence, nor shall anything in this subsection 
     require the Postal Service or any of its contractors to pay 
     for any action taken by a State or political subdivision to 
     carry out this subsection (including reviewing plans, 
     carrying out on-site inspections, issuing building permits, 
     and making recommendations).
       ``(4) Appropriate officials of a State or a political 
     subdivision of a State may make recommendations to the Postal 
     Service concerning measures necessary to meet the 
     requirements of paragraphs (1) and (2). Such officials may 
     also make recommendations to the Postal Service concerning 
     measures which should be taken in the construction or 
     alteration of the building to take into account local 
     conditions. The Postal Service shall give due consideration 
     to any such recommendations.
       ``(5) In addition to consulting with local and State 
     officials under paragraph (3), the Postal Service shall 
     establish procedures for soliciting, assessing, and 
     incorporating local community input on real property and land 
     use decisions.
       ``(6) For purposes of this subsection, the term `State' 
     includes the District of Columbia, the Commonwealth of Puerto 
     Rico, and a territory or possession of the United States.
       ``(h)(1) Notwithstanding any other provision of law, legal 
     representation may not be furnished by the Department of 
     Justice to the Postal Service in any action, suit, or 
     proceeding arising, in whole or in part, under any of the 
     following:
       ``(A) Subsection (d) or (e) of this section.
       ``(B) Subsection (f) or (g) of section 504 (relating to 
     administrative subpoenas by the Postal Regulatory 
     Commission).
       ``(C) Section 3663 (relating to appellate review).

     The Postal Service may, by contract or otherwise, employ 
     attorneys to obtain any legal representation that it is 
     precluded from obtaining from the Department of Justice under 
     this paragraph.
       ``(2) In any circumstance not covered by paragraph (1), the 
     Department of Justice shall, under section 411, furnish the 
     Postal Service such legal representation as it may require, 
     except that, with the prior consent of the Attorney General, 
     the Postal Service may, in any such circumstance, employ 
     attorneys by contract or otherwise to conduct litigation 
     brought by or against the Postal Service or its officers or 
     employees in matters affecting the Postal Service.
       ``(3)(A) In any action, suit, or proceeding in a court of 
     the United States arising in whole or in part under any of 
     the provisions of law referred to in subparagraph (B) or (C) 
     of paragraph (1), and to which the Commission is not 
     otherwise a party, the Commission shall be permitted to 
     appear as a party on its own motion and as of right.
       ``(B) The Department of Justice shall, under such terms and 
     conditions as the Commission and the Attorney General shall 
     consider appropriate, furnish the Commission such legal 
     representation as it may require

[[Page 10561]]

     in connection with any such action, suit, or proceeding, 
     except that, with the prior consent of the Attorney General, 
     the Commission may employ attorneys by contract or otherwise 
     for that purpose.
       ``(i) A judgment against the Government of the United 
     States arising out of activities of the Postal Service shall 
     be paid by the Postal Service out of any funds available to 
     the Postal Service, subject to the restriction specified in 
     section 2011(g).''.
       (b) Technical Amendment.--Section 409(a) of title 39, 
     United States Code, is amended by striking ``Except as 
     provided in section 3628 of this title,'' and inserting 
     ``Except as otherwise provided in this title,''.

                      TITLE V--GENERAL PROVISIONS

     SEC. 501. QUALIFICATION AND TERM REQUIREMENTS FOR GOVERNORS.

       (a) Qualifications.--
       (1) In general.--Section 202(a) of title 39, United States 
     Code, is amended by striking ``(a)'' and inserting ``(a)(1)'' 
     and by striking the fourth sentence and inserting the 
     following: ``The Governors shall represent the public 
     interest generally, and shall be chosen solely on the basis 
     of their demonstrated ability in managing organizations or 
     corporations (in either the public or private sector) of 
     substantial size. The Governors shall not be representatives 
     of specific interests using the Postal Service, and may be 
     removed only for cause.''.
       (2) Applicability.--The amendment made by paragraph (1) 
     shall not affect the appointment or tenure of any person 
     serving as a Governor of the United States Postal Service 
     under an appointment made before the date of the enactment of 
     this Act however, when any such office becomes vacant, the 
     appointment of any person to fill that office shall be made 
     in accordance with such amendment. The requirement set forth 
     in the fourth sentence of section 202(a)(1) of title 39, 
     United States Code (as amended by subsection (a)) shall be 
     met beginning not later than 9 years after the date of the 
     enactment of this Act.
       (b) Consultation Requirement.--Section 202(a) of title 39, 
     United States Code, is amended by adding at the end the 
     following:
       ``(2) In selecting the individuals described in paragraph 
     (1) for nomination for appointment to the position of 
     Governor, the President should consult with the Speaker of 
     the House of Representatives, the minority leader of the 
     House of Representatives, the majority leader of the Senate, 
     and the minority leader of the Senate.''.
       (c) 5-Year Terms.--
       (1) In general.--Section 202(b) of title 39, United States 
     code, is amended in the first sentence by striking ``9 
     years'' and inserting ``5 years''.
       (2) Applicability.--
       (A) Continuation by incumbents.--The amendment made by 
     paragraph (1) shall not affect the tenure of any person 
     serving as a Governor of the United States Postal Service on 
     the date of enactment of this Act and such person may 
     continue to serve the remainder of the applicable term.
       (B) Vacancy by incumbent before 5 years of service.--If a 
     person who is serving as a Governor of the United States 
     Postal Service on the date of enactment of this Act resigns, 
     is removed, or dies before the expiration of the 9-year term 
     of that Governor, and that Governor has served less than 5 
     years of that term, the resulting vacancy in office shall be 
     treated as a vacancy in a 5-year term.
       (C) Vacancy by incumbent after 5 years of service.--If a 
     person who is serving as a Governor of the United States 
     Postal Service on the date of enactment of this Act resigns, 
     is removed, or dies before the expiration of the 9-year term 
     of that Governor, and that Governor has served 5 years or 
     more of that term, that term shall be deemed to have been a 
     5-year term beginning on its commencement date for purposes 
     of determining vacancies in office. Any appointment to the 
     vacant office shall be for a 5-year term beginning at the end 
     of the original 9-year term determined without regard to the 
     deeming under the preceding sentence. Nothing in this 
     subparagraph shall be construed to affect any action or 
     authority of any Governor or the Board of Governors during 
     any portion of a 9-year term deemed to be 5-year term under 
     this subparagraph.
       (d) Term Limitation.--
       (1) In general.--Section 202(b) of title 39, United States 
     Code, is amended--
       (A) by inserting ``(1)'' after ``(b)''; and
       (B) by adding at the end the following:
       ``(2) No person may serve more than 3 terms as a 
     Governor.''.
       (2) Applicability.--The amendments made by paragraph (1) 
     shall not affect the tenure of any person serving as a 
     Governor of the United States Postal Service on the date of 
     enactment of this Act with respect to the term which that 
     person is serving on that date. Such person may continue to 
     serve the remainder of the applicable term, after which the 
     amendments made by paragraph (1) shall apply.

     SEC. 502. OBLIGATIONS.

       (a) Purposes for Which Obligations May Be Issued.--The 
     first sentence of section 2005(a)(1) of title 39, United 
     States Code, is amended by striking ``title.'' and inserting 
     ``title, other than any of the purposes for which the 
     corresponding authority is available to the Postal Service 
     under section 2011.''.
       (b) Increase Relating to Obligations Issued for Capital 
     Improvements.--Section 2005(a)(1) of title 39, United States 
     Code, is amended by striking the third sentence.
       (c) Amounts Which May Be Pledged.--
       (1) Obligations to which provisions apply.--The first 
     sentence of section 2005(b) of title 39, United States Code, 
     is amended by striking ``such obligations,'' and inserting 
     ``obligations issued by the Postal Service under this 
     section,''.
       (2) Assets, revenues, and receipts to which provisions 
     apply.--Subsection (b) of section 2005 of title 39, United 
     States Code, is amended by striking ``(b)'' and inserting 
     ``(b)(1)'', and by adding at the end the following:
       ``(2) Notwithstanding any other provision of this section--
       ``(A) the authority to pledge assets of the Postal Service 
     under this subsection shall be available only to the extent 
     that such assets are not related to the provision of 
     competitive products (as determined under section 2011(h) or, 
     for purposes of any period before accounting practices and 
     principles under section 2011(h) have been established and 
     applied, the best information available from the Postal 
     Service, including the audited statements required by section 
     2008(e)); and
       ``(B) any authority under this subsection relating to the 
     pledging or other use of revenues or receipts of the Postal 
     Service shall be available only to the extent that they are 
     not revenues or receipts of the Competitive Products Fund.''.

     SEC. 503. PRIVATE CARRIAGE OF LETTERS.

       (a) In General.--Section 601 of title 39, United States 
     Code, is amended by striking subsection (b) and inserting the 
     following:
       ``(b) A letter may also be carried out of the mails when--
       ``(1) the amount paid for the private carriage of the 
     letter is at least the amount equal to 6 times the rate then 
     currently charged for the 1st ounce of a single-piece first 
     class letter;
       ``(2) the letter weighs at least 12\1/2\ ounces; or
       ``(3) such carriage is within the scope of services 
     described by regulations of the United States Postal Service 
     (as in effect on July 1, 2001) that purport to permit private 
     carriage by suspension of the operation of this section (as 
     then in effect).
       ``(c) Any regulations necessary to carry out this section 
     shall be promulgated by the Postal Regulatory Commission.''.
       (b) Effective Date.--This section shall take effect on the 
     date as of which the regulations promulgated under section 
     3633 of title 39, United States Code (as amended by section 
     202) take effect.

     SEC. 504. RULEMAKING AUTHORITY.

       Paragraph (2) of section 401 of title 39, United States 
     Code, is amended to read as follows:
       ``(2) to adopt, amend, and repeal such rules and 
     regulations, not inconsistent with this title, as may be 
     necessary in the execution of its functions under this title 
     and such other functions as may be assigned to the Postal 
     Service under any provisions of law outside of this title;''.

     SEC. 505. NONINTERFERENCE WITH COLLECTIVE BARGAINING 
                   AGREEMENTS.

       (a) Labor Disputes.--Section 1207 of title 39, United 
     States Code, is amended to read as follows:

     ``Sec. 1207. Labor disputes

       ``(a) If there is a collective-bargaining agreement in 
     effect, no party to such agreement shall terminate or modify 
     such agreement unless the party desiring such termination or 
     modification serves written notice upon the other party to 
     the agreement of the proposed termination or modification not 
     less than 90 days prior to the expiration date thereof, or 
     not less than 90 days prior to the time it is proposed to 
     make such termination or modification. The party serving such 
     notice shall notify the Federal Mediation and Conciliation 
     Service of the existence of a dispute within 45 days of such 
     notice, if no agreement has been reached by that time.
       ``(b) If the parties fail to reach agreement or to adopt a 
     procedure providing for a binding resolution of a dispute by 
     the expiration date of the agreement in effect, or the date 
     of the proposed termination or modification, the Director of 
     the Federal Mediation and Conciliation Service shall within 
     10 days appoint a mediator of nationwide reputation and 
     professional stature, and who is also a member of the 
     National Academy of Arbitrators. The parties shall cooperate 
     with the mediator in an effort to reach an agreement and 
     shall meet and negotiate in good faith at such times and 
     places that the mediator, in consultation with the parties, 
     shall direct.
       ``(c)(1) If no agreement is reached within 60 days after 
     the expiration or termination of the agreement or the date on 
     which the agreement became subject to modification under 
     subsection (a) of this section, or if the parties decide upon 
     arbitration but do not agree upon the procedures therefore, 
     an arbitration board shall be established consisting of 3 
     members, 1 of whom shall be selected by the Postal Service, 1 
     by the bargaining representative of the employees, and the 
     third by the 2 thus selected. If either of the parties fails 
     to select a member, or if the members chosen by the parties 
     fail to agree on the third person within 5 days after their 
     first

[[Page 10562]]

     meeting, the selection shall be made from a list of names 
     provided by the Director. This list shall consist of not less 
     then 9 names of arbitrators of nationwide reputation and 
     professional nature, who are also members of the National 
     Academy of Arbitrators, and whom the Director has determined 
     are available and willing to serve.
       ``(2) The arbitration board shall give the parties a full 
     and fair hearing, including an opportunity to present 
     evidence in support of their claims, and an opportunity to 
     present their case in person, by counsel or by other 
     representative as they may elect. Decisions of the 
     arbitration board shall be conclusive and binding upon the 
     parties. The arbitration board shall render its decision 
     within 45 days after its appointment.
       ``(3) Costs of the arbitration board and mediation shall be 
     shared equally by the Postal Service and the bargaining 
     representative.
       ``(d) In the case of a bargaining unit whose recognized 
     collective-bargaining representative does not have an 
     agreement with the Postal Service, if the parties fail to 
     reach the agreement within 90 days of the commencement of 
     collective bargaining, a mediator shall be appointed in 
     accordance with the terms in subsection (b) of this section, 
     unless the parties have previously agreed to another 
     procedure for a binding resolution of their differences. If 
     the parties fail to reach agreement within 180 days of the 
     commencement of collective bargaining, and if they have not 
     agreed to another procedure for binding resolution, an 
     arbitration board shall be established to provide conclusive 
     and binding arbitration in accordance with the terms of 
     subsection (c) of this section.''.
       (b) Noninterference With Collective Bargaining 
     Agreements.--Except as otherwise provided by the amendment 
     made by subsection (a), nothing in this Act shall restrict, 
     expand, or otherwise affect any of the rights, privileges, or 
     benefits of either employees of or labor organizations 
     representing employees of the United States Postal Service 
     under chapter 12 of title 39, United States Code, the 
     National Labor Relations Act, any handbook or manual 
     affecting employee labor relations within the United States 
     Postal Service, or any collective bargaining agreement.
       (c) Free Mailing Privileges Continue Unchanged.--Nothing in 
     this Act or any amendment made by this Act shall affect any 
     free mailing privileges accorded under section 3217 or 
     sections 3403 through 3406 of title 39, United States Code.

                TITLE VI--ENHANCED REGULATORY COMMISSION

     SEC. 601. REORGANIZATION AND MODIFICATION OF CERTAIN 
                   PROVISIONS RELATING TO THE POSTAL REGULATORY 
                   COMMISSION.

       (a) Transfer and Redesignation.--Title 39, United States 
     Code, is amended--
       (1) by inserting after chapter 4 the following:

               ``CHAPTER 5--POSTAL REGULATORY COMMISSION

``Sec.
``501. Establishment.
``502. Commissioners.
``503. Rules; regulations; procedures.
``504. Administration.

     ``Sec. 501. Establishment

       ``The Postal Regulatory Commission is an independent 
     establishment of the executive branch of the Government of 
     the United States.

     ``Sec. 502. Commissioners

       ``(a) The Postal Regulatory Commission is composed of 5 
     Commissioners, appointed by the President, by and with the 
     advice and consent of the Senate. The Commissioners shall be 
     chosen solely on the basis of their technical qualifications, 
     professional standing, and demonstrated expertise in 
     economics, accounting, law, or public administration, and may 
     be removed by the President only for cause. Each individual 
     appointed to the Commission shall have the qualifications and 
     expertise necessary to carry out the enhanced 
     responsibilities accorded Commissioners under the Postal 
     Accountability and Enhancement Act. Not more than 3 of the 
     Commissioners may be adherents of the same political party.
       ``(b) No Commissioner shall be financially interested in 
     any enterprise in the private sector of the economy engaged 
     in the delivery of mail matter.
       ``(c) A Commissioner may continue to serve after the 
     expiration of his term until his successor has qualified, 
     except that a Commissioner may not so continue to serve for 
     more than 1 year after the date upon which his term otherwise 
     would expire under subsection (f).
       ``(d) One of the Commissioners shall be designated as 
     Chairman by, and shall serve in the position of Chairman at 
     the pleasure of, the President.
       ``(e) The Commissioners shall by majority vote designate a 
     Vice Chairman of the Commission. The Vice Chairman shall act 
     as Chairman of the Commission in the absence of the Chairman.
       ``(f) The Commissioners shall serve for terms of 6 
     years.'';
       (2) by striking, in subchapter I of chapter 36 (as in 
     effect before the amendment made by section 201(c)), the 
     heading for such subchapter I and all that follows through 
     section 3602; and
       (3) by redesignating sections 3603 and 3604 as sections 503 
     and 504, respectively, and transferring such sections to the 
     end of chapter 5 (as inserted by paragraph (1)).
       (b) Applicability.--The amendment made by subsection (a)(1) 
     shall not affect the appointment or tenure of any person 
     serving as a Commissioner on the Postal Regulatory Commission 
     (as so redesignated by section 604) under an appointment made 
     before the date of the enactment of this Act or any 
     nomination made before that date, but, when any such office 
     becomes vacant, the appointment of any person to fill that 
     office shall be made in accordance with such amendment.
       (c) Clerical Amendment.--The analysis for part I of title 
     39, United States Code, is amended by inserting after the 
     item relating to chapter 4 the following:

  ``5. Postal Regulatory Commission...........................501''....

     SEC. 602. AUTHORITY FOR POSTAL REGULATORY COMMISSION TO ISSUE 
                   SUBPOENAS.

       Section 504 of title 39, United States Code (as so 
     redesignated by section 601) is amended by adding at the end 
     the following:
       ``(f)(1) Any Commissioner of the Postal Regulatory 
     Commission, any administrative law judge appointed by the 
     Commission under section 3105 of title 5, and any employee of 
     the Commission designated by the Commission may administer 
     oaths, examine witnesses, take depositions, and receive 
     evidence.
       ``(2) The Chairman of the Commission, any Commissioner 
     designated by the Chairman, and any administrative law judge 
     appointed by the Commission under section 3105 of title 5 
     may, with respect to any proceeding conducted by the 
     Commission under this title--
       ``(A) issue subpoenas requiring the attendance and 
     presentation of testimony by, or the production of 
     documentary or other evidence in the possession of, any 
     covered person; and
       ``(B) order the taking of depositions and responses to 
     written interrogatories by a covered person.

     The written concurrence of a majority of the Commissioners 
     then holding office shall, with respect to each subpoena 
     under subparagraph (A), be required in advance of its 
     issuance.
       ``(3) In the case of contumacy or failure to obey a 
     subpoena issued under this subsection, upon application by 
     the Commission, the district court of the United States for 
     the district in which the person to whom the subpoena is 
     addressed resides or is served may issue an order requiring 
     such person to appear at any designated place to testify or 
     produce documentary or other evidence. Any failure to obey 
     the order of the court may be punished by the court as a 
     contempt thereof.
       ``(4) For purposes of this subsection, the term `covered 
     person' means an officer, employee, agent, or contractor of 
     the Postal Service.
       ``(g)(1) If the Postal Service determines that any document 
     or other matter it provides to the Postal Regulatory 
     Commission under a subpoena issued under subsection (f), or 
     otherwise at the request of the Commission in connection with 
     any proceeding or other purpose under this title, contains 
     information which is described in section 410(c) of this 
     title, or exempt from public disclosure under section 552(b) 
     of title 5, the Postal Service shall, at the time of 
     providing such matter to the Commission, notify the 
     Commission, in writing, of its determination (and the reasons 
     therefor).
       ``(2) Except as provided in paragraph (3), no officer or 
     employee of the Commission may, with respect to any 
     information as to which the Commission has been notified 
     under paragraph (1)--
       ``(A) use such information for purposes other than the 
     purposes for which it is supplied; or
       ``(B) permit anyone who is not an officer or employee of 
     the Commission to have access to any such information.
       ``(3)(A) Paragraph (2) shall not prohibit the Commission 
     from publicly disclosing relevant information in furtherance 
     of its duties under this title, provided that the Commission 
     has adopted regulations under section 553 of title 5, that 
     establish a procedure for according appropriate 
     confidentiality to information identified by the Postal 
     Service under paragraph (1). In determining the appropriate 
     degree of confidentiality to be accorded information 
     identified by the Postal Service under paragraph (1), the 
     Commission shall balance the nature and extent of the likely 
     commercial injury to the Postal Service against the public 
     interest in maintaining the financial transparency of a 
     government establishment competing in commercial markets.
       ``(B) Paragraph (2) shall not prevent the Commission from 
     requiring production of information in the course of any 
     discovery procedure established in connection with a 
     proceeding under this title. The Commission shall, by 
     regulations based on rule 26(c) of the Federal Rules of Civil 
     Procedure, establish procedures for ensuring appropriate 
     confidentiality for information furnished to any party.''.

     SEC. 603. APPROPRIATIONS FOR THE POSTAL REGULATORY 
                   COMMISSION.

       (a) Authorization of Appropriations.--Subsection (d) of 
     section 504 of title 39, United States Code (as so 
     redesignated by section 601) is amended to read as follows:

[[Page 10563]]

       ``(d) There are authorized to be appropriated, out of the 
     Postal Service Fund, such sums as may be necessary for the 
     Postal Regulatory Commission. In requesting an appropriation 
     under this subsection for a fiscal year, the Commission shall 
     prepare and submit to the Congress under section 2009 a 
     budget of the Commission's expenses, including expenses for 
     facilities, supplies, compensation, and employee benefits.''.
       (b) Budget Program.--
       (1) In general.--The next to last sentence of section 2009 
     of title 39, United States Code, is amended to read as 
     follows: ``The budget program shall also include separate 
     statements of the amounts which (1) the Postal Service 
     requests to be appropriated under subsections (b) and (c) of 
     section 2401, (2) the Office of Inspector General of the 
     United States Postal Service requests to be appropriated, out 
     of the Postal Service Fund, under section 8G(f) of the 
     Inspector General Act of 1978, and (3) the Postal Regulatory 
     Commission requests to be appropriated, out of the Postal 
     Service Fund, under section 504(d) of this title.''.
       (2) Conforming amendment.--Section 2003(e)(1) of title 39, 
     United States Code, is amended by striking the first sentence 
     and inserting the following: ``The Fund shall be available 
     for the payment of (A) all expenses incurred by the Postal 
     Service in carrying out its functions as provided by law, 
     subject to the same limitation as set forth in the 
     parenthetical matter under subsection (a); (B) all expenses 
     of the Postal Regulatory Commission, subject to the 
     availability of amounts appropriated under section 504(d); 
     and (C) all expenses of the Office of Inspector General, 
     subject to the availability of amounts appropriated under 
     section 8G(f) of the Inspector General Act of 1978.''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply with respect to fiscal years beginning on or after 
     October 1, 2002.
       (2) Savings provision.--The provisions of title 39, United 
     States Code, that are amended by this section shall, for 
     purposes of any fiscal year before the first fiscal year to 
     which the amendments made by this section apply, continue to 
     apply in the same way as if this section had never been 
     enacted.

     SEC. 604. REDESIGNATION OF THE POSTAL RATE COMMISSION.

       (a) Amendments to Title 39, United States Code.--Title 39, 
     United States Code, is amended in sections 404, 503 and 504 
     (as so redesignated by section 601), 1001 and 1002, by 
     striking ``Postal Rate Commission'' each place it appears and 
     inserting ``Postal Regulatory Commission'';
       (b) Amendments to Title 5, United States Code.--Title 5, 
     United States Code, is amended in sections 104(1), 306(f), 
     2104(b), 3371(3), 5314 (in the item relating to Chairman, 
     Postal Rate Commission), 5315 (in the item relating to 
     Members, Postal Rate Commission), 5514(a)(5)(B), 
     7342(a)(1)(A), 7511(a)(1)(B)(ii), 8402(c)(1), 8423(b)(1)(B), 
     and 8474(c)(4) by striking ``Postal Rate Commission'' and 
     inserting ``Postal Regulatory Commission''.
       (c) Amendment to the Ethics in Government Act of 1978.--
     Section 101(f)(6) of the Ethics in Government Act of 1978 (5 
     U.S.C. App.) is amended by striking ``Postal Rate 
     Commission'' and inserting ``Postal Regulatory Commission''.
       (d) Amendment to the Rehabilitation Act of 1973.--Section 
     501(b) of the Rehabilitation Act of 1973 (29 U.S.C. 791(b)) 
     is amended by striking ``Postal Rate Office'' and inserting 
     ``Postal Regulatory Commission''.
       (e) Amendment to Title 44, United States Code.--Section 
     3502(5) of title 44, United States Code, is amended by 
     striking ``Postal Rate Commission'' and inserting ``Postal 
     Regulatory Commission''.
       (f) Other References.--Whenever a reference is made in any 
     provision of law (other than this Act or a provision of law 
     amended by this Act), regulation, rule, document, or other 
     record of the United States to the Postal Rate Commission, 
     such reference shall be considered a reference to the Postal 
     Regulatory Commission.

     SEC. 605. FINANCIAL TRANSPARENCY.

       Section 101 of title 39, United States Code, is amended--
       (1) by redesignating subsections (d) through (g) as 
     subsections (e) through (h), respectively; and
       (2) by inserting after subsection (c) the following:
       ``(d) As an independent establishment of the executive 
     branch of the Government of the United States, the Postal 
     Service shall be subject to a high degree of transparency to 
     ensure fair treatment of customers of the Postal Service's 
     market-dominant products and companies competing with the 
     Postal Service's competitive products.''.

                         TITLE VII--EVALUATIONS

     SEC. 701. ASSESSMENTS OF RATEMAKING, CLASSIFICATION, AND 
                   OTHER PROVISIONS.

       (a) In General.--The Postal Regulatory Commission shall, at 
     least every 3 years, submit a report to the President and 
     Congress concerning--
       (1) the operation of the amendments made by this Act; and
       (2) recommendations for any legislation or other measures 
     necessary to improve the effectiveness or efficiency of the 
     postal laws of the United States.
       (b) Postal Service Views.--A report under this section 
     shall be submitted only after reasonable opportunity has been 
     afforded to the Postal Service to review the report and to 
     submit written comments on the report. Any comments timely 
     received from the Postal Service under the preceding sentence 
     shall be attached to the report submitted under subsection 
     (a).

     SEC. 702. REPORT ON UNIVERSAL POSTAL SERVICE AND THE POSTAL 
                   MONOPOLY.

       (a) Report by the Postal Service.--
       (1) In general.--Not later than 12 months after the date of 
     enactment of this Act, the Postal Regulatory Commission shall 
     submit a report to the President and Congress on universal 
     postal service and the postal monopoly in the United States 
     (in this section referred to as ``universal service and the 
     postal monopoly''), including the monopoly on the delivery of 
     mail and on access to mailboxes.
       (2) Contents.--The report under this subsection shall 
     include--
       (A) a comprehensive review of the history and development 
     of universal service and the postal monopoly, including how 
     the scope and standards of universal service and the postal 
     monopoly have evolved over time for the Nation and its urban 
     and rural areas;
       (B) the scope and standards of universal service and the 
     postal monopoly provided under current law (including 
     sections 101 and 403 of title 39, United States Code), and 
     current rules, regulations, policy statements, and practices 
     of the Postal Service;
       (C) a description of any geographic areas, populations, 
     communities (including both urban and rural communities), 
     organizations, or other groups or entities not currently 
     covered by universal service or that are covered but that are 
     receiving services deficient in scope or quality or both; and
       (D) the scope and standards of universal service and the 
     postal monopoly likely to be required in the future in order 
     to meet the needs and expectations of the United States 
     public, including all types of mail users, based on 
     discussion of such assumptions, alternative sets of 
     assumptions, and analyses as the Postal Service considers 
     plausible.
       (b) Recommended Changes to Universal Service and the 
     Monopoly.--The Postal Regulatory Commission shall include in 
     the report under subsection (a), and in all reports submitted 
     under section 701 of this Act--
       (1) any recommended changes to universal service and the 
     postal monopoly as the Commission considers appropriate, 
     including changes that the Commission may implement under 
     current law and changes that would require changes to current 
     law, with estimated effects of the recommendations on the 
     service, financial condition, rates, and security of mail 
     provided by the Postal Service;
       (2) with respect to each recommended change described under 
     paragraph (1)--
       (A) an estimate of the costs of the Postal Service 
     attributable to the obligation to provide universal service 
     under current law; and
       (B) an analysis of the likely benefit of the current postal 
     monopoly to the ability of the Postal Service to sustain the 
     current scope and standards of universal service, including 
     estimates of the financial benefit of the postal monopoly to 
     the extent practicable, under current law; and
       (3) such additional topics and recommendations as the 
     Commission considers appropriate, with estimated effects of 
     the recommendations on the service, financial condition, 
     rates, and the security of mail provided by the Postal 
     Service.

     SEC. 703. STUDY ON EQUAL APPLICATION OF LAWS TO COMPETITIVE 
                   PRODUCTS.

       (a) In General.--The Federal Trade Commission shall prepare 
     and submit to the President and Congress, and to the Postal 
     Regulatory Commission, within 1 year after the date of the 
     enactment of this Act, a comprehensive report identifying 
     Federal and State laws that apply differently to the United 
     States Postal Service with respect to the competitive 
     category of mail (within the meaning of section 102 of title 
     39, United States Code, as amended by section 101) and 
     similar products provided by private companies.
       (b) Recommendations.--The Federal Trade Commission shall 
     include such recommendations as it considers appropriate for 
     bringing such legal discrimination to an end, and in the 
     interim, to account under section 3633 of title 39, United 
     States Code (as added by this Act), for the net economic 
     advantages provided by those laws.
       (c) Consultation.--In preparing its report, the Federal 
     Trade Commission shall consult with the United States Postal 
     Service, the Postal Regulatory Commission, other Federal 
     agencies, mailers, private companies that provide delivery 
     services, and the general public, and shall append to such 
     report any written comments received under this subsection.
       (d) Competitive Product Regulation.--The Postal Regulatory 
     Commission shall take into account the recommendations of the 
     Federal Trade Commission in promulgating or revising the 
     regulations required under section 3633 of title 39, United 
     States Code.

[[Page 10564]]



   TITLE VIII--POSTAL SERVICE RETIREMENT AND HEALTH BENEFITS FUNDING

     SEC. 801. SHORT TITLE.

       This title may be cited as the ``Postal Civil Service 
     Retirement and Health Benefits Funding Amendments of 2004''.

     SEC. 802. CIVIL SERVICE RETIREMENT SYSTEM.

       (a) In General.--Chapter 83 of title 5, United States Code, 
     is amended--
       (1) in section 8334(a)(1)(B), by striking clause (ii) and 
     inserting the following:
       ``(ii) In the case of an employee of the United States 
     Postal Service, no amount shall be contributed under this 
     subparagraph.''; and
       (2) by amending section 8348(h) to read as follows:
       ``(h)(1) In this subsection, the term `Postal surplus or 
     supplemental liability' means the estimated difference, as 
     determined by the Office, between--
       ``(A) the actuarial present value of all future benefits 
     payable from the Fund under this subchapter to current or 
     former employees of the United States Postal Service and 
     attributable to civilian employment with the United States 
     Postal Service; and
       ``(B) the sum of--
       ``(i) the actuarial present value of deductions to be 
     withheld from the future basic pay of employees of the United 
     States Postal Service currently subject to this subchapter 
     under section 8334;
       ``(ii) that portion of the Fund balance, as of the date the 
     Postal surplus or supplemental liability is determined, 
     attributable to payments to the Fund by the United States 
     Postal Service and its employees, minus benefit payments 
     attributable to civilian employment with the United States 
     Postal Service, plus the earnings on such amounts while in 
     the Fund; and
       ``(iii) any other appropriate amount, as determined by the 
     Office in accordance with generally accepted actuarial 
     practices and principles.
       ``(2)(A) Not later than June 30, 2006, the Office shall 
     determine the Postal surplus or supplemental liability, as of 
     September 30, 2005. If that result is a surplus, the amount 
     of the surplus shall be transferred to the Postal Service 
     Retiree Health Benefits Fund established under section 8909a. 
     If the result is a supplemental liability, the Office shall 
     establish an amortization schedule, including a series of 
     annual installments commencing September 30, 2006, which 
     provides for the liquidation of such liability by September 
     30, 2043.
       ``(B) The Office shall redetermine the Postal surplus or 
     supplemental liability as of the close of the fiscal year, 
     for each fiscal year beginning after September 30, 2006, 
     through the fiscal year ending September 30, 2038. If the 
     result is a surplus, that amount shall remain in the Fund 
     until distribution is authorized under subparagraph (C), and 
     any prior amortization schedule for payments shall be 
     terminated. If the result is a supplemental liability, the 
     Office shall establish a new amortization schedule, including 
     a series of annual installments commencing on September 30 of 
     the subsequent fiscal year, which provides for the 
     liquidation of such liability by September 30, 2043.
       ``(C) As of the close of the fiscal years ending September 
     30, 2015, 2025, 2035, and 2039, if the result is a surplus, 
     that amount shall be transferred to the Postal Service 
     Retiree Health Benefits Fund, and any prior amortization 
     schedule for payments shall be terminated.
       ``(D) Amortization schedules established under this 
     paragraph shall be set in accordance with generally accepted 
     actuarial practices and principles, with interest computed at 
     the rate used in the most recent valuation of the Civil 
     Service Retirement System.
       ``(E) The United States Postal Service shall pay the 
     amounts so determined to the Office, with payments due not 
     later than the date scheduled by the Office.
       ``(3) Notwithstanding any other provision of law, in 
     computing the amount of any payment under any other 
     subsection of this section that is based upon the amount of 
     the unfunded liability, such payment shall be computed 
     disregarding that portion of the unfunded liability that the 
     Office determines will be liquidated by payments under this 
     subsection.''.
       (b) Credit Allowed for Military Service.--In the 
     application of section 8348(g)(2) of title 5, United States 
     Code, for the fiscal year 2006, the Office of Personnel 
     Management shall include, in addition to the amount otherwise 
     computed under that paragraph, the amounts that would have 
     been included for the fiscal years 2003 through 2005 with 
     respect to credit for military service of former employees of 
     the United States Postal Service as though the Postal Civil 
     Service Retirement System Funding Reform Act of 2003 (Public 
     Law 108-18) had not been enacted, and the Secretary of the 
     Treasury shall make the required transfer to the Civil 
     Service Retirement and Disability Fund based on that amount.

     SEC. 803. HEALTH INSURANCE.

       (a) In General.--Chapter 89 of title 5, United States Code, 
     is amended--
       (1) in section 8906(g)(2)(A), by striking ``shall be paid 
     by the United States Postal Service.'' and inserting ``shall 
     be paid first from the Postal Service Retiree Health Benefits 
     Fund up to the amount contained in the Fund, with any 
     remaining amount paid by the United States Postal Service.''; 
     and
       (2) by inserting after section 8909 the following:

     ``Sec. 8909a. Postal Service Retiree Health Benefit Fund

       ``(a) There is in the Treasury of the United States a 
     Postal Service Retiree Health Benefits Fund which is 
     administered by the Office of Personnel Management.
       ``(b) The Fund is available without fiscal year limitation 
     for payments required under section 8906(g)(2)(A).
       ``(c) The Secretary of the Treasury shall immediately 
     invest, in interest-bearing securities of the United States 
     such currently available portions of the Fund as are not 
     immediately required for payments from the Fund. Such 
     investments shall be made in the same manner as investments 
     for the Civil Service Retirement and Disability Fund under 
     section 8348.
       ``(d)(1) Not later than December 31, 2006, and by December 
     31 of each succeeding year, the Office shall compute the net 
     present value of the future payments required under section 
     8906(g)(2)(A) and attributable to the service of Postal 
     Service employees during the most recently ended fiscal year.
       ``(2)(A) Not later than December 31, 2006, the Office shall 
     compute, and by December 31 of each succeeding year, the 
     Office shall recompute the difference between--
       ``(i) the net present value of the excess of future 
     payments required under section 8906(g)(2)(A) for current and 
     future United States Postal Service annuitants as of the end 
     of the fiscal year ending on September 30 of that year; and
       ``(ii)(I) the value of the assets of the Postal Retiree 
     Health Benefits Fund as of the end of the fiscal year ending 
     on September 30 of that year; and
       ``(II) the net present value computed under paragraph (1).
       ``(B) Not later than December 31, 2006, the Office shall 
     compute, and by December 31 of each succeeding year shall 
     recompute, an amortization schedule including a series of 
     annual installments which provide for the liquidation by 
     January 31, 2046, or within 15 years, whichever is later, of 
     the net present value determined under subparagraph (A), 
     including interest at the rate used in that computation.
       ``(3) Not later than January 31, 2007, and by January 31 of 
     each succeeding year, the United States Postal Service shall 
     pay into such Fund--
       ``(A) the net present value computed under paragraph (1); 
     and
       ``(B) the annual installment computed under paragraph 
     (2)(B).
       ``(4) Computations under this subsection shall be made 
     consistent with the assumptions and methodology used by the 
     Office for financial reporting under subchapter II of chapter 
     35 of title 31.
       ``(5) After consultation with the United States Postal 
     Service, the Office shall promulgate any regulations the 
     Office determines necessary under this subsection.''.
       (b) Technical and Conforming Amendment.--The table of 
     sections for chapter 89 of title 5, United States Code, is 
     amended by inserting after the item relating to section 8909 
     the following:

``8909a. Postal Service Retiree Health Benefits Fund.''.

     SEC. 804. REPEAL OF DISPOSITION OF SAVINGS PROVISION.

       Section 3 of the Postal Civil Service Retirement System 
     Funding Reform Act of 2003 (Public Law 108-18) is repealed.

     SEC. 805. EFFECTIVE DATES.

       (a) In General.--Except as provided under subsection (b), 
     this title shall take effect on October 1, 2005.
       (b) Termination of Employer Contribution.--The amendment 
     made by paragraph (1) of section 802(a) shall take effect on 
     the first day of the first pay period beginning on or after 
     October 1, 2005.

                TITLE IX--COMPENSATION FOR WORK INJURIES

     SEC. 901. TEMPORARY DISABILITY; CONTINUATION OF PAY.

       (a) Time of Accrual of Right.--Section 8117 of title 5, 
     United States Code, is amended--
       (1) by striking ``An employee'' and inserting ``(a) An 
     employee other than a Postal Service employee''; and
       (2) by adding at the end the following:
       ``(b) A Postal Service employee is not entitled to 
     compensation or continuation of pay for the first 3 days of 
     temporary disability. A Postal Service employee may use 
     annual leave, sick leave, or leave without pay during that 3-
     day period.''.
       (b) Technical and Conforming Amendment.--Section 8118(b)(1) 
     of title 5, United States Code, is amended to read as 
     follows:
       ``(1) without a break in time, except as provided under 
     section 8117;''.

     SEC. 902. DISABILITY RETIREMENT FOR POSTAL EMPLOYEES.

       (a) Total Disability.--Section 8105 of title 5, United 
     States Code, is amended--
       (1) in subsection (a), by adding at the end the following: 
     ``This section applies to a Postal Service employee, except 
     as provided under subsection (c).''; and
       (2) by adding at the end the following:
       ``(c)(1) In this subsection, the term `retirement age' has 
     the meaning given under section 216(l)(1) of the Social 
     Security Act (42 U.S.C. 416(l)(1)).

[[Page 10565]]

       ``(2) Notwithstanding any other provision of law, for any 
     injury occurring on or after the date of enactment of the 
     Postal Accountability and Enhancement Act, and for any new 
     claim for a period of disability commencing on or after that 
     date, the compensation entitlement for total disability is 
     converted to 50 percent of the monthly pay of the employee on 
     the later of--
       ``(A) the date on which the injured employee reaches 
     retirement age; or
       ``(B) 1 year after the employee begins receiving 
     compensation.''.
       (b) Partial Disability.--Section 8106 of title 5, United 
     States Code, is amended--
       (1) in subsection (a), by adding at the end the following: 
     ``This section applies to a Postal Service employee, except 
     as provided under subsection (d).''; and
       (2) by adding at the end the following:
       ``(d)(1) In this subsection, the term `retirement age' has 
     the meaning given under section 216(l)(1) of the Social 
     Security Act (42 U.S.C. 416(l)(1)).
       ``(2) Notwithstanding any other provision of law, for any 
     injury occurring on or after the date of enactment of this 
     subsection, and for any new claim for a period of disability 
     commencing on or after that date, the compensation 
     entitlement for partial disability is converted to 50 percent 
     of the difference between the monthly pay of an employee and 
     the monthly wage earning capacity of the employee after the 
     beginning of partial disability on the later of--
       ``(A) the date on which the injured employee reaches 
     retirement age; or
       ``(B) 1 year after the employee begins receiving 
     compensation.''.
                                  ____



                                         United States General

                                            Accounting Office,

                                 Washington, DC, February 6, 2004.
     Hon. Susan M. Collins,
     Chairman, Committee on Governmental Affairs, United States 
         Senate.

     Need for Comprehensive Postal Reform
       Dear Chairman Collins: This letter responds to your request 
     for our views on the need for postal reform and is based upon 
     our prior testimonies related to this issue. In summary, we 
     believe that comprehensive postal reform is urgently needed. 
     The ability of the Service to remain financially viable is at 
     risk because its current business model--which relies on mail 
     volume growth to cover the costs of its expanding delivery 
     network--is not well aligned with 21st century realities. 
     Since we placed the Postal Service's transformation efforts 
     and financial outlook on our High-Risk List in April 2001, I 
     have testified on several occasions about the governance, 
     financial, operational, and human capital challenges that 
     threaten the Service's ability to carry out its mission. If 
     not effectively addressed in a timely manner, these 
     challenges serve to threaten the Service's ability to remain 
     self-supporting while providing affordable, high-quality and 
     universal postal services to all Americans.
       The following key trends serve to reinforce our view that 
     enactment of postal reform legislation is needed:
       Declining mail volume: Total mail volume declined in fiscal 
     year 2003 for the third year in a row--a historical first for 
     the Service, which has depended on rising mail volume to help 
     cover rising costs and mitigate rate increases. First-Class 
     Mail volume declined by a record 3.2 percent in fiscal year 
     2003 and is projected to decline annually for the foreseeable 
     future. Some of this decline is due to technology advances 
     (e.g. E-mail, digital phones, faxes, and electronic bill 
     payments) that are likely to increase in the future. This 
     trend is particularly significant because First-Class Mail 
     covers more than two-thirds of the Service's institutional 
     costs.
       Changes in the mail mix: The Service's mail mix is changing 
     with declining volume for high-margin products, such as 
     First-Class Mail, and increasing volume of lower-margin 
     products, such as some types of Standard Mail. These changes 
     reduce revenues available to cover the Service's 
     institutional costs.
       Increased competition from private delivery companies: 
     Private delivery companies dominate the market for parcels 
     greater than 2 pounds and appear to be making inroads into 
     the market for small parcels. Priority Mail volume fell 13.9 
     percent in fiscal year 2003 and over the last 3 years has 
     declined nearly 30 percent. Once a highly profitable growth 
     product for the Service, Priority Mail volume is declining as 
     the highly competitive parcel market turns to lower-priced 
     ground shipment alternatives. Express Mail volume is 
     declining for the same reason. In addition, United Parcel 
     Service (UPS) and FedEx have established national retail 
     networks through UPS's acquisition of MailBoxes Etc., now 
     called UPS Stores, and FedEx's recent acquisition of Kinko's.
       Subpar revenue growth: The Service's revenues are budgeted 
     for zero growth in fiscal year 2004, which would be the first 
     year since postal reorganization that postal revenues have 
     failed to increase. However, as the Service has recognized, 
     even the zero-growth target will be challenging. In the 
     absence of revenue growth generated by increasing volume, the 
     Service must rely more heavily on rate increases to cover 
     rising costs and help finance capital investment needs.
       Declining capital investment: The Service's capital cash 
     outlays declined from $3.3 billion in fiscal year 2000 to 
     $1.3 billion in fiscal year 2003, which was the lowest level 
     since fiscal year 1986, and far below the level of the late 
     1990s, when the Service spent more than $3 billion annually. 
     Capital cash outlays are budgeted to increase to $2.4 billion 
     in fiscal year 2004, but this level may not be sufficient to 
     enable the Service to fully fund its capital investment 
     needs. In the longer term, it is unclear what the Service's 
     needs will be to maintain and modernize its physical 
     infrastructure, as well as how these needs will be funded.
       Renewed difficulties in substantially improving postal 
     productivity: The Service's productivity increased by 1.8 
     percent in fiscal year 2003 but is estimated to increase by 
     only 0.4 percent in fiscal year 2004. In the absence of mail 
     volume growth, substantial productivity increases will be 
     required to help cover cost increases generated by rising 
     wages and benefit costs and to mitigate rate increases.
       Significant financial liabilities and obligations: Despite 
     the passage of legislation that reduced the Service's pension 
     obligations, the Service has about $88 billion to $98 billion 
     in liabilities and obligations that include $47 billion to 
     $57 billion in unfunded retiree health benefits. Under the 
     current pay-as-you-go system, the Service may have difficulty 
     financing its retiree health benefits obligation in the 
     future if mail volume trends continue to impact revenues 
     while costs in this area continue to rise. The Service has 
     recently proposed two options to Congress, so the Service 
     could prefund this obligation to the extent that it is 
     financially able.
       Uncertain funding for emergency preparedness: The Service 
     requested $350 million for emergency preparedness for fiscal 
     year 2004, which it did not receive, and $779 million for 
     fiscal year 2005. If the money is not appropriated, funding 
     for this purpose may have to be built into postal rates.
       Challenges to achieve sufficient cost cutting: The Service 
     achieved additional cost cutting to compensate for below-
     budget revenues in fiscal year 2003. Despite this progress, 
     in the longer term it is unclear whether continued cost-
     cutting efforts can offset declines in First-Class Mail 
     volume without impacting the quality of service.
       Although we have discussed numerous actions that the Postal 
     Service can take within its existing authority to improve its 
     overall efficiency and effectiveness, we do not believe that 
     incremental steps toward postal transformation can resolve 
     the fundamental and systemic issues associated with the 
     Service's current business model. To avoid the risk of a 
     significant taxpayer bailout or dramatic postal rate 
     increases, we believe that Congress should enact 
     comprehensive postal reform legislation that includes the 
     Service's overall statutory framework, resolution of issues 
     regarding the Service's pension and retiree health benefits 
     obligations, and whether there is a continued need for an 
     escrow account.
       The key areas of the Service's statutory framework that 
     need to be addressed include:
       Clarifying the Service's mission and role by defining the 
     scope of universal service and the postal monopoly and by 
     clarifying the role of the Service in regard to competition 
     and its regulatory functions.
       Enhancing governance, transparency, and accountability by 
     delineating public policy, operational, and regulatory 
     responsibilities; by ensuring managerial accountability 
     through a strong, well-qualified corporate-style board that 
     holds its officers responsible and accountable for achieving 
     real results; and by defining appropriate reporting 
     mechanisms to enhance the Service's transparency and 
     accountability for financial and performance results.
       Improving flexibilities and oversight by balancing 
     increased flexibility for the Service--through streamlining 
     the rate-setting process and allowing a certain amount of 
     retained earnings--with appropriate oversight by a 
     independent regulatory body to protect postal customers 
     against undue discrimination, to restrict cross-subsidies, 
     and to ensure due process. In addition, the Service needs 
     additional flexibility to rationalize its infrastructure and 
     reshape its workforce. Any such additional flexibility should 
     be accompanied by appropriate safeguards to prevent abuse 
     along with enhanced transparency and accountability 
     mechanisms.
       Making needed human capital reforms such as (1) determining 
     the Service's responsibility for pension costs related to 
     military service, funding retiree health benefits, and 
     determining what action to take on the escrow account 
     established in recent pension legislation; (2) deciding 
     whether postal workers' compensation benefits should be on 
     par with those in the private sector; and (3) clarifying pay 
     comparability standards.
       We believe that Congress now has a rare opportunity to 
     assure the Service's long-term financial viability through 
     comprehensive postal reform legislation that addresses the 
     Service's key structural and systemic deficiencies, its 
     unfunded obligations, including its retiree health benefits 
     obligation, and the escrow requirement. Key legislative and 
     administrative actions in connection with transforming the 
     Postal Service can also serve as positive examples for other 
     key government transformation efforts.

[[Page 10566]]

       As agreed with your office, unless you publicly announce 
     the contents of this report earlier, we plan no further 
     distribution until 30 days from the date of this letter. At 
     that time, we will provide copies to interested congressional 
     committees. We will also make copies available to others on 
     request. In addition, the report will be available at no 
     charge on the GAO Web site at http://www.gao.gov.
       For additional information about this report, please 
     contact Mark L. Goldstein, Director, Physical Infrastructure 
     Issues at (202) 512-2834 or at [email protected]. Please 
     contact me if I can be of any further assistance to help make 
     comprehensive postal reform a reality.
           Sincerely yours,
                                                  David M. Walker,
                         Comptroller General of the United States.

   Mr. CARPER. Mr. President, I rise today to join Senator Collins in 
introducing the Postal Accountability and Enhancement Act of 2004, 
legislation that makes the reforms necessary for the Postal Service to 
thrive in the 21st Century and to better serve the American people.
   This bill is based in part on S. 1285, the comprehensive postal 
reform legislation I introduced nearly a year ago. S. 1285 was itself 
based on ten years of work on postal reform in the House of 
Representatives, led by Congressman, John McHugh from New York. It is 
also inspired by the work of the postal commission formed by President 
Bush last year, called the President's Commission on the United States 
Postal Service, which studied all aspects of the Postal Service and 
made recommendations on how it could be modernized.
   When I rose to introduce S. 1285 last June, the House Government 
Reform Committee had only recently failed to report out the latest 
version of the McHugh reform bill and the President's Commission was 
only weeks away from issuing its final recommendations. Along with a 
number of other observers, I feared that the McHugh bill's fate might 
have spelled the end of postal reform for some time. I also feared that 
the Commission's recommendations would focus on some of the more 
extreme reform proposals floated in the past, such as postal 
privatization. While the Commission did make a handful of 
recommendations that I believe go too far, I was pleased to see that 
its work largely mirrored the provisions in S. 1285 and the various 
House reform bills we have seen in recent years.
   I'd like to begin, then, by thanking Congressman McHugh  and his 
colleagues on the House Government Reform Committee for its visionary 
leadership on postal reform over the years. I'd also like to thank the 
members of the President's Commission, especially co-chairs James A. 
Johnson and Harry J. Pearce, for their service. Postal reform is a 
difficult issue. It is also a vitally important issue for every 
American who depends on the Postal Service every day. Their willingness 
to listen to all sides of the debate and to craft what is, for the most 
part, a set of balanced reform recommendations is admired and 
appreciated. The work they have done has brought to light a number of 
the key issues facing the Postal Service and has made it possible to 
get a bipartisan postal reform bill signed into law this year.
   Senator Collins also deserves our thanks and applause for her hard 
work on this issue. Under her leadership, the Governmental Affairs 
Committee held a series of eight excellent hearings on postal reform 
over the past few months. She and I and our staffs have also held 
countless meetings with the various stakeholders for more than a year 
now. Everyone with an interest in the Postal Service was given an 
opportunity to have their say, and I think that's reflected in the 
balanced bill we're introducing today.
  It's always a pleasure working with Senator Collins. We've worked 
together on a number of issues over the years--from welfare reform to 
homeland security and the future of passenger rail in our country. Her 
dedication to bipartisanship, and simply doing the right thing, is rare 
these days. It's a honor to be introducing this historic bill with her 
today.
  Let me also express to Senator Lieberman, our Committee's Ranking 
Member, my appreciation for giving me the opportunity as a freshman 
Senator to work so closely on one of the most important issues to come 
before Governmental Affairs. The support he and his staff have offered 
us throughout this process has been invaluable.
  Some of our colleagues may wonder why we need postal reform. They 
probably receive few complaints about the service their constituents 
get from the Postal Service and its employees. In fact, a survey 
conducted by the President's Commission indicated that the American 
people like the Postal Service just the way it is. We must keep in 
mind, however, that, despite the fact that the mailing industry, and 
the economy as a whole, have changed radically over the years, the 
Postal Service has, for the most part, remained unchanged for more than 
three decades now.
  In the early 1970s, Senator Stevens and others led the effort in the 
Senate to create the Postal Service out of the failing Post Office 
Department. At the time, the Post Office Department received about 20 
percent of its revenue from taxpayer subsidies. Service was suffering 
and there was little money available to expand.
  By all accounts, the product of Senator Stevens' labors, the Postal 
Reorganization Act signed into law by President Nixon in 1971, has been 
a phenomenal success. The Postal Service today receives virtually no 
taxpayer support and the service its hundreds of thousands of employees 
provide to every American, every day is second to none. More than 
thirty years after its birth, the Postal Service now delivers to 141 
million addresses each day and is the anchor of a $900 billion per year 
mailing industry.
  As we celebrate the Postal Service's successes, however, we need to 
be thinking about what needs to be done to make them just as successful 
in the years to come. When the Postal Service started out in 1971, no 
one had access to fax machines, cell phones and pagers. No one imagined 
that we would ever enjoy conveniences like e-mail and electronic bill 
payment. Most of the mail I receive from my constituents these days 
arrives via fax and e-mail instead of hard copy mail, a marked change 
from my days in the House and even from my more recent days as Governor 
of Delaware.
  This continuing electronic diversion of mail, coupled with economic 
recession and terrorism, has made for some rough going at the Postal 
Service in recent years. In 2001, as Postmaster General Potter came 
onboard, the Postal Service was projecting its third consecutive year 
of deficits. They lost $199 million in fiscal year 2000 and $1.68 
billion in fiscal year 2001. They were projecting losses of up to $4 
billion in fiscal year 2002. Mail volume was falling, revenues were 
below projections and the Postal Service was estimating that it needed 
to spend $4 billion on security enhancements in order to prevent a 
repeat of the tragic anthrax attacks that took several lives. The 
Postal Service was also perilously close to its $15 billion debt 
ceiling and had been forced to raise rates three times in less than two 
years in order to pay for its operations, further eroding mail volume.
  Good things have happened since 2001, though. First, General Potter 
has led a commendable effort to make the Postal Service more efficient. 
Billions of dollars in costs and have been taken out of the system. 
Thousands of positions have been eliminated through attrition. 
Successful automation programs have yielded great benefits. Perhaps 
more dramatically, the Postal Service also learned that an unfunded 
pension liability they once believed was an high as $32 billion was 
actually $5 billion. Senator Collins and I responded with legislation, 
the Postal Civil Service Retirement System Funding Reform Act, signed 
into law by President Bush last year, which cuts the amount the Postal 
Service must pay into the Civil Service Retirement System each year by 
nearly $3 billion. This has freed up money for debt reduction and 
prevented the need for another rate increase until at least 2006.
  Aggressive cost cutting and a lower pension payment, then, have put 
off the emergency that would have come if the Postal Service had 
reached its debt limit. But cost cutting can only go so

[[Page 10567]]

far and will not solve the Postal Service's long-term challenges. These 
long-term challenges were laid out in stark detail earlier this year 
when Postmaster General Potter and Postal Board of Governors Chairman 
David Fineman testified before the House Government Reform Committee's 
Special Panel on Postal Reform. Chairman Fineman pointed out then that 
the total volume of mail delivered by the Postal Service has declined 
by more than 5 billion pieces since 2000. Over the same period, the 
number of homes and businesses the Postal Service delivers to have 
increased by more than 5 million. First Class mail, the largest 
contributor to the Postal Service's bottom line, is leading the decline 
in volume. Some of those disappearing First Class letters are being 
replaced by advertising mail, which earns significantly less. Many 
First Class letters have likely been lost for good to the fax machine, 
e-mail and electronic bill pay.
  Despite electronic diversion, the Postal Service continues to add 
about 1.7 million new delivery points each year, creating the need for 
thousands of new routes and thousands of new letter carriers to work 
them. In addition, faster-growing parts of the country will need new or 
expanded postal facilities in the coming years. As more and more 
customers turn to electronic forms of communication, letter carriers 
are bringing fewer and fewer pieces of mail to each address they serve. 
The rate increases that will be needed to maintain the Postal Service's 
current infrastructure, finance retirement obligations to its current 
employees, pay for new letter carriers and build facilities in growing 
part of the country will only further erode mail volume.
  As I've mentioned, the Postal Service has been trying to improve on 
its own. They are making progress, but there is only so much they can 
do. Even if the economy begins to recover more quickly and the Postal 
Service begins to see volume and revenues improve, we will still need 
to make fundamental changes in the way the Postal Service operates in 
order to make them as successful in the 21st Century as they were in 
the 20th Century.
  This is where the Postal Accountability and Enhancement Act comes in. 
First, our bill begins the process of developing a modern rate system 
for pricing Postal Service products. The new system, to be developed by 
a strengthened Postal Rate Commission, re-named the Postal Regulatory 
Commission, would allow retained earnings, provide the Postal Service 
significantly more flexibility in setting prices and streamline today's 
burdensome ratemaking process. To provide stability, predictability and 
fairness for the Postal Service's customers, rates would remain within 
an inflation-based cap to be developed by the Commission.
  In addition, the new rate system will allow the Postal Service to 
negotiate service agreements with individual mailers. The Postal Rate 
Commission in recent years did approve a service agreement the Postal 
Service negotiated with Capital One, but the process for considering 
the agreement took almost a year and the Postal Service's authority to 
enter into such agreements is not clearly spelled out in law. The 
Postal Accountability and Enhancement Act allows the Postal Service to 
enter into agreements if the revenue generated from them covers all 
costs attributable to the Postal Service and will result in no less 
contribution to the institutional costs of the Postal Service than 
would have been generated had the agreement not been entered into. No 
agreement would be permitted if it resulted in higher rates for any 
other mailer or prohibited any similarly situated mailer from 
negotiating a similar agreement.
  The new rate system also includes some important safeguards meant to 
prohibit worksharing discounts that exceed costs avoided by the Postal 
Service. Now, worksharing on the part of mailers has been an important 
part of the productivity improvements at the Postal Service in recent 
years. Mailers should get credit in the form of a discount for work 
they do to their mail, such as presorting and barcoding or transporting 
mail deeper into the postal system. The discounts they receive, 
however, should have some rational relation to the benefit the Postal 
Service gets from the worksharing. The Postal Service should continue 
to be free to use discounts to incent mailers to be more efficient. 
They also should not be forced to impose large rate increases on 
workshared mail in order to comply with a strict prohibition on 
discounts in excess of costs avoided. Discounts in excess of costs 
avoided, however, should be temporary and reasonable. Our worksharing 
language strikes a good balance in that it prohibits the Postal Service 
from outsourcing work that could be performed cheaper in house while 
maintaining pricing flexibility.
  The second major provision in the Postal Accountability and 
Enhancement Act requires the Postal Regulatory Commission to set strong 
service standards for the Postal Service's Market Dominant products, a 
category made up mostly of those products, like First Class mail, that 
are part of the postal monopoly. The Postal Service currently sets its 
own service standards, which allows them to pursue efforts like the 
elimination of Saturday delivery, a proposal floated three years ago. 
The new standards set by the Commission will aim to improve service and 
will be used by the Postal Service to establish performance goals, 
rationalize its physical infrastructure and streamline its workforce.
   In a rate system featuring rate caps, as any system established 
under the Postal Accountability and Enhancement Act must, I believe it 
is especially important that the Regulatory Commission, not the Postal 
Service, be charged with determining the appropriate level of service 
postal customers should receive. This will prevent the Postal Service 
form cutting service as a way to keep rates below the cap. The Postal 
Service should be forced to look to productivity enhancements, not 
poorer quality service, to find savings.
  Third, the Postal Accountability and Enhancement Act ensures that the 
Postal Service competes fairly. The bill prohibits the Postal Service 
from issuing anti-competitive regulations. It also subjects the Postal 
Service to state zoning, planning and land use laws, requires them to 
pay an assumed Federal income tax on products like packages and Express 
Mail that private firms also offer and requires that these products as 
a whole pay their share of the Postal Service's institutional costs. 
The Federal Trade Commission will further study any additional legal 
benefits the Postal Service enjoys that its private sector competitors 
do not. The Regulatory Commission will then find a way to use the rate 
system to level the playing field.
   Fourth, the Postal Accountability and Enhancement Act improves 
Postal Service accountability, mostly by strengthening oversight. 
Qualifications for membership on the Regulatory Commission would be 
stronger than those for the Rate Commission so that Commissioners would 
have a background in finance or economics. Commissioners would also 
have the power to demand information from the Postal Service, including 
by subpoena, and have the power to punish them for violating rate and 
service regulations. In addition, the Commission will make an annual 
determination as to whether the Postal Service is in compliance with 
rate law and meeting service standards and will have the power to 
punish them for any transgressions.
  Fifth, the Postal Accountability and Enhancement Act revises two 
provisions from the Postal Civil Service Retirement System Funding 
Reform Act in an effort to shore up the Postal Service's finances in 
the years to come. As our colleagues may be aware, that bill requires 
the Postal Service, beginning in 2006, to deposit any savings it enjoys 
by virtue of lower pension payments into an escrow account. In this 
bill, we eliminate that requirement in order to allow the Postal 
Service to spend the money that would have gone into escrow according 
to the plan submitted by the Postal Service in September of last year, 
which called for using most of the savings to begin paying down the 
Postal Service's $50 billion retiree health obligation. The bill

[[Page 10568]]

Senator Collins and I are introducing today also reverses the provision 
in the Postal Civil Service Retirement System Funding Reform Act that 
made the Postal Service the only Federal agency shouldered with the 
burden of paying the additional pension benefits owed to their 
employees by virtue of past military service.
  Finally, and most importantly, the bill preserves universal service 
and the postal monopoly and forces the Postal Service to concentrate 
solely on what it does best--processing and delivering the mail to all 
Americans. Our bill limits the Postal Service, for the first time, to 
providing ``postal services,'' meaning they would be prohibited from 
engaging in other lines of business, such as e-commerce, that draw time 
and resources away from letter and package delivery. It also explicitly 
preserves the requirement that the Postal Service ``bind the Nation 
together through the mail'' and serve all parts of the country, urban, 
suburban and rural, in a non-discriminatory fashion. Any service 
standards established by the Postal Regulatory Commission will continue 
to ensure delivery to every address, every day. In addition, the bill 
maintains the prohibition on closing post offices solely because they 
operate at a deficit, ensuring that rural and urban customers continue 
to enjoy full access to retail postal services.
  The President's Commission, while calling for the preservation of 
universal service and the postal monopoly, opened the door for future 
changes by recommending that the Regulatory Commission be given the 
authority to make them themselves. While I believe that Congress will 
find it difficult to roll back universal service or limit the postal 
monopoly in the future if it is deemed necessary to do so, I believe 
the recommendation from the President's Commission would give too much 
power to a relatively small, political body. In order to keep Congress 
focused on the Postal Service's future, however, our bill asks the 
Regulatory Commission to report every three years on the state of 
universal service and the postal monopoly. When necessary, they would 
also make recommendations to Congress when they feel like one is 
necessary.
  We have a once-in-a-generation opportunity this year to enact 
meaningful postal reform legislation. The House Government Reform 
Committee marked up its version of the Postal Accountability and 
Enhancement Act last week by a unanimous 40-0 vote. The President has 
indicated his support for a bill, releasing a set of postal reform 
principles at the end of last year calling on Congress to make some key 
changes to the way the Postal Service operates. We now have everyone 
from the National Association of Letter Carriers to former opponents of 
reform like UPS supporting our efforts, as well as those in the House. 
I know there are still some concerns about certain provisions in our 
bill, but I look forward to working with Senator Collins and each of 
our colleagues in the coming weeks to continue this momentum and get a 
bill through Congress that can be signed into law this year.
  It's amazing to me to think that the Postal Service, something 
Senator Stevens was able to put together at the beginning of his 
career, could have lasted so long and had such an impact on every 
American. I'm hopeful that the model Senator Collins and I have set out 
in this bill today can last at least that long and have just as 
positive an impact on our nation and our economy as the Postal Service 
did so many years ago.
  Mr. STEVENS. Mr. President, I am pleased to join Chairman Collins and 
Senator Carper as an original cosponsor of S. 2468, the Postal 
Accountability and Enhancement Act. In 2002, the President formed a 
Commission to evaluate the operations of the United States Postal 
Service. Earlier this year, the President's Commission issued a 
comprehensive report filled with suggestions on how to improve the 
Postal Service. Senator Collins became actively engaged on the issue of 
postal reform and held a series of hearing this year on postal reform. 
This bill is the product of the postal reform hearings held before the 
Government Affairs Committee.
  I expect I will have suggestions on this legislation as the bill 
moves through the legislative process. However, I support Senator 
Collins's commitment to postal reform. I look forward to working with 
her and Senator Carper in Committee and on the Senate floor to ensure 
the success of this legislation.
  Mr. AKAKA. Mr. President, I am pleased to join with Senator Collins 
and Senator Carper, who today have introduced the Postal Accountability 
and Enhancement Act. I commend both of my Governmental Affairs 
Committee colleagues for their leadership in crafting a postal reform 
bill.
  For some time, the General Accounting Office has warned that the 
long-term financial outlook for the U.S. Postal Service was at risk 
without significant changes. At the request of the Governmental Affairs 
Committee, the U.S. Postal Service developed a transformation plan that 
offered its vision for the future. Late in 2002, a Presidential Postal 
Commission was convened, which issued a number of recommendations in 
2003.
  Over the past 6 months, I have participated in a series of hearings 
chaired by Senator Collins which examined the recommendations of the 
Postal Commission. I commend Senator Collins for guaranteeing that the 
divergent views were seriously considered throughout our eight 
hearings. I also wish to commend my colleague from Delaware, Senator 
Carper, for his strong and early commitment to postal reform.
  I support modernizing the U.S. Postal Service to ensure that its 
mission of providing 6 days a week universal service at an affordable 
rate is preserved. Although the legislation introduced today responds 
to many of the recommendations and concerns we heard in our hearings, 
it wisely rejects others. However, like most bills, there are 
provisions that trouble me. I am particularly concerned with the 
sections relating to worksharing and changes to the Federal Employees' 
Compensation Act (FECA). I will continue to work with the bill's 
sponsors to address these provisions, which I believe do not promote 
cost savings for the Postal Service or fairness for postal workers.
  I look forward to working with my colleagues on this legislation to 
guarantee that the U.S. Postal Service will be in position to best 
serve the public in the 21st century, be a model employer, and protect 
the retirement future of its employees.
                                 ______
                                 
      By Mr. BOND (for himself, Mr. Harkin, Mr. Durbin, Mr. Talent, Mr. 
        Grassley, Mr. Coleman, Mr. Fitzgerald, and Mr. Pryor):
  S. 2470. A bill to enhance navigation capacity improvements and the 
ecosystem restoration plan for the Upper Mississippi River and Illinois 
Waterway System; to the Committee on Environment and Public Works.
  Mr. BOND. Mr. President, today, I join my colleagues, Senators 
Harkin, Durbin, Talent, Grassley, Coleman, Fitzgerald and Pryor to 
introduce bipartisan legislation to provide transportation efficiency 
and environmental sustainability on the Mississippi and Illinois 
Rivers.
  As the world becomes more competitive, we must also. In the 
heartland, the efficiency, reliability, capacity, and safety of our 
transportation options are critical--often make-or-break. As we look 50 
years into the future, and as we anticipate and try to promote 
commercial and economic growth, we have to ask ourselves a fundamental 
question: should we have a system that permits and promotes growth, or 
should we be satisfied to restrict our growth to the confines of a 
transportation straight jacket designed not for 2050, but for 1980?
  Further, we must ask ourselves if dramatic investments should be made 
to address environmental problems and opportunities that exist on these 
great waterways.
  In both cases, the answer is, ``Of course we should modernize and 
improve.''
  We have a system which is in environmental and economic decline. Jobs 
and markets and the availability of

[[Page 10569]]

habitat for fish and wildlife are at stake.
  We cannot be for increased trade, commercial growth, and job creation 
without supporting the basic transportation infrastructure necessary to 
move goods from buyers to sellers. New efficiency helps give our 
producers an edge that can make or break opportunities in the 
international marketplace.
  Seventy years ago, some argued that a transportation system on the 
Mississippi River was not justified. Congress decided that its role was 
not to try to predict the future but to shape the future and decided to 
invest in a system despite the naysayers. Over 80 million tons per year 
later, it is clear that the decision was wise.
  Now, that system that was designed for paddlewheel boats and to last 
50 years is nearly 70 years old and we must make decisions that will 
shape the next 50-70 years. As we look ahead, we must promote growth 
policies that help Americans who produce and employ.
  We must work for policies that promote economic growth, job creation, 
and environmental sustainability. We know that trade and economic 
growth can be fostered or it can be discouraged by policies and other 
realities which include the quality of our transportation 
infrastructure.
  So in 20 and 30 and 40 and 50 years, where will the growth in 
transportation occur to accommodate the growth in demand for commercial 
shipping? The Department of Transportation suggests that congestion on 
our roads and rails will double in the next quarter century. The fact 
of the matter is that the great untapped capacity is on our water.
  This is good news because water transportation is efficient, it is 
safe, it conserves fuel, and it protects the air and the environment. 
One medium-sized barge tow can carry the freight of 870 trucks. That 
fact alone speaks volumes to the benefits of water. If we can, would we 
rather have 870 diesel engines on the roads of downtown St. Louis, or 
two diesel engines on the water watching the traffic buildup and smog 
glide by?
  The veteran Chief Economist at USDA testified that transportation 
efficiency and the ability of farmers to win markets at higher prices 
are ``fundamentally related.'' He predicts that corn exports over the 
next 10 years will rise 45 percent, 70 percent of which will travel 
down the Mississippi.
  Over the past 35 years, waterborne commerce on the Upper Mississippi 
River has more than tripled. The system currently carries 60 percent of 
our Nation's corn exports and 45 percent of our Nation's soybean 
exports and it does so at two-thirds the cost of rail--when rail is 
available.
  Over the previous 11 years, the U.S. Army Corps of Engineers have 
spent $70 million doing a six year study. During that period, there 
have been 35 meetings of the Governors Liaison Committee, 28 meetings 
on the Economic Coordinating Committee, among the States along the 
Upper Mississippi and Illinois waterways, and there have been 44 
meetings of the Navigation and Environmental Coordination Committee. 
Additionally, there have been 130 briefings for special interest 
groups, 24 newsletters. There have been six sets of public meetings in 
46 locations with over 4,000 people in attendance. To say the least, 
this has been a very long, very transparent, and very representative 
process.
  However, while we have been studying, our competitors have been 
building. Given the extraordinary delay so far, and given the reality 
that large scale construction takes not weeks or months, but decades, 
further delay is no longer an option.
  This is why I am leased to be joined by a bipartisan group of 
Senators who agree that we must improve the efficiency and the 
environmental sustainability of our great resources. Today, we 
introduce legislation to adopt the initial recommendations of the Corps 
of Engineers and their public and private partners to increase the lock 
capacity on the Upper Mississippi and Illinois Rivers and the begin an 
ambitious program of ecosystem restoration.
  This plan gets the Corps back in the business of building the future, 
rather than just haggling about predicting the future. More will need 
to be done later on ecosystem and lock expansions further upstream, but 
this begins the improvement schedule underway.
  In this legislation, we authorize $1.46 billion for ecosystem 
restoration--two times the federal share of lock capacity expansion 
which we authorize on locks 20-25 on the Mississippi River and Peoria 
and LaGrange on the Illinois. The new 1,200 foot locks on the 
Mississippi River will provide equal capacity in the bottleneck region 
below the 1,200 foot lock 19 at Keokuk above locks 26 and 27 near St. 
Louis. Half the cost of the new locks will be paid for by private users 
who pay into the Inland Waterways Trust fund. Additional funds will be 
provided for mitigation and small scale and nonstructural measures to 
improve efficiency.
  As we look ahead, the locks at 14-18 will have to be addressed as 
will further investments to ecosystem restoration efforts.
  This effort is supported by a broad-based group of the States, farm 
groups, shippers, labor, and those who pay taxes into the Trust Fund 
for improvements.
  I thank my colleagues for their work together on this bipartisan 
effort.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2470

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. FINDINGS.

       Congress finds that--
       (1) in section 1103(a)(2) of the Water Resources 
     Development Act of 1986 (100 Stat. 4225), Congress recognized 
     the Upper Mississippi River System as ``a nationally 
     significant ecosystem and a nationally significant commercial 
     navigation system'' and declared that the system ``shall be 
     administered and regulated in recognition of its several 
     purposes'';
       (2) inaction on construction of new locks will lead to 
     economic decline, and inaction on implementation of an 
     enhanced ecosystem restoration program will lead to further 
     environmental decline;
       (3) the Upper Mississippi River and Illinois Waterway carry 
     approximately 60 percent of the corn exports of the United 
     States and 45 percent of the soybean exports of the United 
     States, providing a significant positive balance of trade 
     benefit for the Nation;
       (4) the movement of more than 100,000,000 tons of product 
     supports 400,000 full- and part-time jobs in the United 
     States, generating over $4,000,000,000 in income and 
     $12,000,000,000 to $15,000,000,000 in economic activity;
       (5) Midwestern utilities use coal, the second largest 
     category of cargo shipped on the Upper Mississippi River 
     System, to produce cost-efficient energy;
       (6) keeping the cost of transportation lower through 
     competition between transportation modes is the United States 
     farmer's competitive advantage in capturing future global 
     growth in agricultural exports;
       (7) United States farm and trade policies work to open 
     world markets and promote United States exports, and water 
     resource policy has provided a low-cost transportation 
     alternative to other modes;
       (8) the Department of Agriculture projects that corn 
     exports will grow 44 percent over the next decade, with a \1/
     3\ increase in growth exported through the Gulf of Mexico;
       (9) those transportation savings--
       (A) provide higher income to farmers and rural communities; 
     and
       (B) generate Federal and State taxes to support community 
     activities, quality of life, and national benefits;
       (10) the construction of new 1,200-foot locks and lock 
     extensions will provide more than 48,000,000 man-hours of 
     employment over 10 to 15 years;
       (11) foreign competitors have worked over the last 10 years 
     to improve foreign transportation infrastructure to compete 
     more effectively with United States production;
       (12) the inland waterway transportation system moves 16 
     percent of the freight in the United States for 2 percent of 
     the cost, including more than 100,000,000 tons on the Upper 
     Mississippi River System;
       (13) the Department of Transportation projects that freight 
     congestion on the roads and rails in the United States will 
     double in the next 25 years and that water transportation 
     will need to play an increasing role in moving freight;
       (14) the movement of 100,000,000 tons on the river system 
     in 4,400 15-barge tows out of harms way would require an 
     equivalent of 4,000,000 trucks or 1,000,000 rail cars moving 
     directly through our communities;

[[Page 10570]]

       (15) econometric models are useful analytic tools to 
     provide valuable information, but are unable to account for 
     every market trend, development, and public policy impact;
       (16) the current capacity of the Upper Mississippi River 
     System is--
       (A) declining by 10 percent annually because of unplanned 
     closures of a 70-year old infrastructure; and
       (B) reducing the potential for sustained growth;
       (17) the current 600-foot lock system was designed for 
     steamboats, at a time when 4,000,000 tons moved on the 
     Mississippi River and a total of 2,000,000,000 bushels of 
     corn were produced nationally, compared to today, when 
     100,000,000 to 120,000,000 tons are shipped and the national 
     production of corn exceeds 10,000,000,000 bushels;
       (18) the 600-foot locks at Locks and Dam Nos. 20, 21, 22, 
     24, and 25 on the Upper Mississippi River and LaGrange and 
     Peoria on the Illinois Waterway are operating at 80 percent 
     utilization and are unable to provide for or process 
     effectively the volatile growth of traditional export grain 
     markets;
       (19) based on the current construction schedule of new 
     locks and dams on the inland system, lock modernization will 
     need to take place over 30 years, starting immediately, as an 
     imperative to avoid lost export grain sales and diminished 
     national competitiveness;
       (20) the Corps of Engineers has been studying the needs for 
     national investments on the Upper Mississippi River System 
     for the last 15 years and has based initial recommendations 
     on the best available information and science;
       (21) the Upper Mississippi and Illinois Rivers ecosystem 
     consists of hundreds of thousands of acres of bottomland 
     forests, islands, backwaters, side channels, and wetlands;
       (22) the river ecosystem is home to 270 species of birds, 
     57 species of mammals, 45 species of amphibians and reptiles, 
     113 species of fish, and nearly 50 species of mussels;
       (23) more than 40 percent of migratory waterfowl and 
     shorebirds in North America depend on the river for food, 
     shelter, and habitat during migration;
       (24) the annual operation of the Upper Mississippi River 
     Basin needs to take into consideration opportunities for 
     ecosystem restoration;
       (25) development since the 1930's has altered and reduced 
     the biological diversity of the large flood plain river 
     systems of the Upper Mississippi and Illinois Rivers;
       (26) Congress recognizes the need for significant Federal 
     investment in the restoration of the Upper Mississippi and 
     Illinois River ecosystems;
       (27) the Upper Mississippi River System provides important 
     economic benefits from recreational and tourist uses, 
     resulting in the basin's receiving more visitors annually 
     than most National Parks, with the ecosystems and wildlife 
     being the main attractions; and
       (28) the Upper Mississippi River System--
       (A) includes 284,688 acres of National Wildlife Refuge land 
     that is managed as habitat for migratory birds, fish, 
     threatened and endangered species, and a diverse assortment 
     of other species and related habitats; and
       (B) provides many recreational opportunities.

     SEC. 2. ENHANCED NAVIGATION CAPACITY IMPROVEMENTS AND 
                   ECOSYSTEM RESTORATION PLAN FOR THE UPPER 
                   MISSISSIPPI RIVER AND ILLINOIS WATERWAY SYSTEM.

       (a) Definitions.-- In this section:
       (1) Plan.--The term ``Plan'' means the preferred integrated 
     plan contained in the document entitled ``Integrated 
     Feasibility Report and Programmatic Environmental Impact 
     Statement for the UMR-IWW System Navigation Feasibility 
     System'' and dated April 29, 2004.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of the Army.
       (3) Upper mississippi river and illinois waterway system.--
     The term ``Upper Mississippi River and Illinois Waterway 
     System'' means the projects for navigation and ecosystem 
     restoration authorized by Congress for--
       (A) the segment of the Mississippi River from the 
     confluence with the Ohio River, River Mile 0.0, to Upper St. 
     Anthony Falls Lock in Minneapolis-St. Paul, Minnesota, River 
     Mile 854.0; and
       (B) the Illinois Waterway from its confluence with the 
     Mississippi River at Grafton, Illinois, River Mile 0.0, to 
     T.J. O'Brien Lock in Chicago, Illinois, River Mile 327.0.
       (b) Authorization of Construction of Navigation 
     Improvements.--
       (1) Small scale and nonstructural measures.--At a cost of 
     $24,000,000 in funds from the general fund of the Treasury, 
     to be matched in an equal amount from the Inland Waterways 
     Trust Fund (which is paid by private users), the Secretary 
     shall--
       (A) construct mooring facilities at Locks 12, 14, 18, 20, 
     22, 24, and LaGrange Lock;
       (B) provide switchboats at Locks 20 through 25 over 5 years 
     for project operation; and
       (C) conduct development and testing of an appointment 
     scheduling system.
       (2) New locks.--At a cost of $730,000,000 in funds from the 
     general fund of the Treasury, with an equal matching amount 
     provided from the Inland Waterways Trust Fund (which is paid 
     by the private users), the Secretary shall construct new 
     1,200-foot locks at Locks 20, 21, 22, 24, and 25 on the Upper 
     Mississippi River and at LaGrange Lock and Peoria Lock on the 
     Illinois Waterway.
       (3) Mitigation.--At a cost of $100,000,000 in funds from 
     the general fund of the Treasury, with an equal matching 
     amount provided from the Inland Waterway Trust Fund (which is 
     paid by private users), the Secretary shall conduct 
     mitigation for new locks and small scale and nonstructural 
     measures authorized under paragraphs (1) and (2).
       (c) Ecosystem Restoration Authorization.--
       (1) Operation.--To ensure the environmental sustainability 
     of the existing Upper Mississippi River and Illinois Waterway 
     System, the Secretary shall, consistent with requirements to 
     avoid any adverse effects on navigation, modify the operation 
     of the Upper Mississippi River and Illinois Waterway System 
     to address the cumulative environmental impacts of operation 
     of the system and improve the ecological integrity of the 
     Upper Mississippi River and Illinois River.
       (2) Ecosystem restoration projects.--
       (A) In general.--The Secretary shall, consistent with 
     requirements to avoid any adverse effects on navigation, 
     carry out ecosystem restoration projects to attain and 
     maintain the sustainability of the ecosystem of the Upper 
     Mississippi River and Illinois River in accordance with the 
     general framework outlined in the Plan.
       (B) Projects included.--Ecosystem restoration projects may 
     include--
       (i) island building;
       (ii) construction of fish passages;
       (iii) floodplain restoration;
       (iv) water level management (including water drawdown);
       (v) backwater restoration;
       (vi) side channel restoration;
       (vii) wing dam and dike restoration and modification;
       (viii) island and shoreline protection;
       (ix) topographical diversity;
       (x) dam point control;
       (xi) use of dredged material for environmental purposes;
       (xii) tributary confluence restoration;
       (xiii) spillway modification to benefit the environment;
       (xiv) land easement authority; and
       (xv) land acquisition.
       (C) Cost sharing.--
       (i) In general.--Except as provided in clause (ii), the 
     Federal share of the cost of carrying out an ecosystem 
     restoration project under this paragraph shall be 65 percent.
       (ii) Exception for certain restoration projects.--In the 
     case of a project under this paragraph for ecosystem 
     restoration, the Federal share of the cost of carrying out 
     the project shall be 100 percent if the project--

       (I) is located below the ordinary high water mark or in a 
     connected backwater;
       (II) modifies the operation or structures for navigation; 
     or
       (III) is located on federally owned land.

       (iii) Nongovernmental organizations.--Nongovernmental 
     organizations shall be eligible to contribute the non-Federal 
     cost-sharing requirements applicable to projects under this 
     paragraph.
       (D) Land acquisition.--The Secretary may acquire land or an 
     interest in land for an ecosystem restoration project from a 
     willing owner through conveyance of--
       (i) fee title to the land; or
       (ii) a flood plain conservation easement.
       (3) Specific projects authorization.--
       (A) In general.--Subject to subparagraph (B), the ecosystem 
     restoration projects described in paragraph (2) shall be 
     carried out at a total construction cost of $1,460,000,000.
       (B) Limitation on available funds.--Of the amounts made 
     available under subparagraph (A), not more than $35,000,000 
     for each fiscal year shall be available for land acquisition 
     under paragraph (2)(D).
       (4) Implementation reports.--
       (A) In general.--Not later than June 30, 2005, and every 4 
     years thereafter, the Secretary shall submit to the Committee 
     on Environment and Public Works of the Senate and the 
     Committee on Transportation and Infrastructure of the House 
     of Representatives an implementation report that--
       (i) includes baselines, benchmarks, goals, and priorities 
     for ecosystem restoration projects; and
       (ii) measures the progress in meeting the goals.
       (B) Advisory panel.--
       (i) In general.--The Secretary shall appoint and convene an 
     advisory panel to provide independent guidance in the 
     development of each implementation report under subparagraph 
     (A).
       (ii) Panelists.--Panelists shall include--

       (I) 1 representative of each of the State resource agencies 
     (or a designee of the Governor of the State) from each of the 
     States of Illinois, Iowa, Minnesota, Missouri, and Wisconsin;
       (II) 1 representative of the Department of Agriculture;
       (III) 1 representative of the Department of Transportation;

[[Page 10571]]

       (IV) 1 representative of the United States Geological 
     Survey;
       (V) 1 representative of the United States Fish and Wildlife 
     Service;
       (VI) 1 representative of the Environmental Protection 
     Agency;
       (VII) 1 representative of affected landowners;
       (VIII) 2 representatives of conservation and environmental 
     advocacy groups; and
       (IX) 2 representatives of agriculture and industry advocacy 
     groups.

       (iii) Co-chairpersons.--The Secretary and the Secretary of 
     the Interior shall serve as co-chairpersons of the advisory 
     panel.
       (d) Authorization of Appropriations.--Except as otherwise 
     provided in this section--
       (1) there are authorized to be appropriated such sums as 
     are necessary to carry out this section for fiscal years 2006 
     through 2020; and
       (2) after fiscal year 2020--
       (A) funds that have been made available under this section, 
     but have not been expended, may be expended; and
       (B) funds that have been authorized to be appropriated 
     under this section, but have not been made available, may be 
     made available.

  Mr. HARKIN. Mr. President, I rise to discuss a bipartisan measure on 
which I have worked closely with my colleague from Missouri, Senator 
Bond. The purpose of this bill is to expand the transportation 
infrastructure and improve the ecosystem of the upper Mississippi 
River.
  I have been deeply involved with Mississippi navigation issues 
because of their enormous importance to farmers in Iowa. Efficient 
river transportation is critical to keeping Iowa commodity costs 
competitive with foreign and domestic alternatives. When shipping on 
the river is constrained, costs rise. That, in turn, leads to price 
increases for moving bulk farm commodities by alternative means, mainly 
rail. These price differentials seem relatively small compared to the 
total price, but they make a huge difference in farm income.
  Clearly, river traffic on the Mississippi is incredibly important to 
producers in my State. As a result of traffic congestion on the 
Mississippi, producers in the upper Midwest face longer shipping times, 
higher costs, and lost revenue. In the short run, enhanced traffic 
management can improve the situation. And it is important to have 
helper boats to push long barges through crowded locks. This bill 
addresses these two matters. But we need a longer-term solution, too. 
It is incredibly important that we modernize a number of the locks on 
the upper Mississippi--and we need to get started as soon as possible.
  Existing law requires exhaustive analysis of river-use levels looking 
decades into the future. The studies required for such predictions are, 
by their very nature, highly speculative at best. There is no shortage 
of critics of the U.S. Army Corps of Engineers and its methods. But we 
can all agree that, to remain competitive, America needs to keep the 
arteries and veins of America's river transportation system in smooth 
running order. Last year, I visited Brazil and saw first-hand their 
remarkable efforts to modernize and improve their river transportation 
system. We need to keep up with countries like Brazil, if we are going 
to remain competitive. We simply cannot wait any longer to authorize 
construction of 1,200-foot locks so barge tows can move through the 
upper Mississippi and Illinois without being split.
  However, this is not an easy issue. Over the years, I have heard time 
and time again from constituents and national leaders who are concerned 
about the environment, as I am. People correctly insist that we 
maintain a balance between navigation, flood control, and environmental 
protection. Habitat for many species, and the Mississippi river 
ecosystem as a whole, has deteriorated since the construction of the 
original lock system in the 1930's.
  The Mississippi River is home to a wide variety of fish and birds, as 
well as other wildlife. All of this wildlife, and the abundant plant 
life, too, are important to the character and life of the Mississippi 
River. Approximately 40 percent of North America's waterfowl and 
shorebirds use the Mississippi Flyway. Parts of the Upper Mississippi 
River serve could well be the most important area for migrating diving 
ducks in the United States. The Mississippi River also serves as 
habitat for breeding and wintering birds, including the bald eagle.
  We are all aware of the problems that have plagued the Corps' past 
work on the Mississippi River. But the Corps has pledged to 
dramatically step up its emphasis on environmental protection. We need 
to work with the Corps to ensure that all updates and renovations of 
locks and dams are done with keen concern for the environment and for 
the fish and wildlife that depend on the Mississippi River habitat. At 
the same time, we need to give the Corps the authorization and funding 
it needs to accomplish real ecosystem restoration, and not just make up 
for the lost habitat of specific identified species. The legislation we 
are proposing accomplishes this.
  We understand that this bill is going to be a challenge in these 
difficult budget times. But to not act would be penny wise and pound 
foolish. We need to be thinking of the long-term economic health of our 
agricultural producers and shippers, hand in hand with the long-term 
health of the diverse ecosystems in the river. I believe the 
legislation we are proposing strikes a careful balance. I look forward 
to working closely with my colleagues to achieve those goals.
  Mr. TALENT. Mr. President, I rise today to as a cosponsor of 
legislation to modernize our aging waterways infrastructure on the 
Upper Mississippi River and the Illinois River.
  I am glad to join my colleague from Missouri, Senator Bond as well as 
Senators Harkin and Grassley in introducing a bill to upgrade and 
modernize the failing infrastructure on the Upper Mississippi and 
Illinois Rivers.
  This $2.9 billion authorization will also bring great benefits to the 
fish habitat along the river through construction of fish passages, 
floodplain restoration and side channel restoration. I commend Senators 
Bond and Harkin for working to find some balance in this important 
issue. I have always said, navigation and habitat restoration do not 
have to be mutually exclusive.
  The locks and dams that are in place today are vital to our national 
economy. These national waterways serve as our competitive advantage to 
our overseas competitors, and this a clean and efficient way to move 
goods and commodities for export. The Upper Mississippi River and 
Illinois Waterway carry approximately 60 percent of the country's corn 
exports and 45 percent of our soybean exports, providing a significant 
positive balance of trade benefit for the Nation. Over half of the 
Soybeans produced in Missiouri head down the Mississippi River to the 
Gulf where they are shipped to markets overseas.
  To me, this issue is a question of common sense. Water transportation 
is safe, clean and efficient. One medium barge tow can carry the same 
freight as 870 tractor trailer trucks. This relieves highway 
congestion, reduces shipping costs, and reduces fuels consumption and 
air emissions. Despite this, we'll still have opponents to this bill 
saying that it isn't good for the environment.
  This bill is a win-win. It will take steps to reduce some of the 
burdens on our transportation systems, as well as providing more 
opportunities for our agricultural producers to export their products.
  These locks are old and outdated. The current 600-foot lock system 
was designed for streamboats, at a time when 4 million tons moved on 
the Mississippi River and a total of 2 billion bushels of corn were 
produced nationally, compared to today, when 100 million to 120 million 
tons are shipped and the national production of corn exceeds 10 million 
bushels. We need to bring these locks into the 21st Century.
  If we don't fix this aging infrastructure now, it will only become 
more costly. If I get a hole in the roof of my house, my wife and I may 
discuss how to fix it, but we know we will make the repair. If you 
don't make the repairs and upgrades, the problem only gets worse. That 
is what we have done to the locks and dams on the Mississippi River. I 
don't want this to be a situation where the roof actually falls in--we 
must modernize the system.
  I commend my colleague from Missouri and his leadership on this 
issue.

[[Page 10572]]

This is a good bill and I am happy to join him as a cosponsor. I look 
forward to continuing to work with him on this important issue.
  Mr. GRASSLEY. Mr. President, I am pleased to be an original cosponsor 
of bipartisan legislation to authorize the modernization of the lock 
and dam infrastructure and enhanced environmental restoration on the 
Upper Mississippi and Illinois Rivers.
  Modernizing the inland waterway transportation system remains a high 
priority for the Upper Mississippi River basin and for agricultural, 
commercial, and labor interests that rely on the river to transport 
their products. In addition to strong grassroots support for this 
endeavor, the State legislatures have passed resolutions endorsing lock 
and dam modernization, ecosystem restoration, and Congressional action.
  Agriculture and related industries in Iowa and the other States on 
the Upper Mississippi remain competitive in world markets, despite 
higher production costs, because of the efficiencies inherent in river 
transport. More than 60 percent of all grain exports move from the 
Upper Mississippi, making this competitive advantage vital to their 
ability to operate their business. Over 400,000 full and part-time jobs 
in our basin are connected to the river. Without modernization, Midwest 
producers will not be able to compete in anticipated world grain export 
growth.
  Furthermore, a recent study estimates the loss of 30,000 jobs 
nationwide, $562 million annually in lost farm income and $185 million 
annually in lost State and local tax receipts if the lock and dam 
system is not upgraded. Providing U.S. agricultural producers every 
opportunity to export their products to world markets is essential for 
their financial well-being and future viability.
  While it is important to consider economic benefits, we must also 
protect the ecosystem of the river. A cooperative solution can meet the 
needs of farmers and waterway users while at the same time improve the 
environment and stem the decline of the Rivers' ecosystems through 
enhanced authorities. Restoring the ecosystem is not mutually exclusive 
to lock modernization.
  After 12 years and $70 million of study, we firmly believe that the 
time has come to take action. I urge my colleagues to support this 
legislation providing initial authorization to begin the modernization 
process and enhance the authorities to address broader ecosystem 
restoration. Without immediate action, the health of both the 
agriculture economy and river ecosystem will continue to decline.
  Mr. COLEMAN. Mr. President, the Mississippi River is a national 
treasure and this legislation authorizes programs that will help 
restore water quality and rehabilitate wildlife and wildlife habitat on 
the river.
  The annual operation of the Upper Mississippi River Basin needs to 
take into consideration opportunities for ecosystem restoration. The 
Upper Mississippi River ecosystem consists of hundreds of thousands of 
acres of bottomland forests, islands, backwaters, side channels and 
wetlands. The Upper Mississippi River system includes 284,688 acres of 
National Wildlife Refuge land that is managed as habitat for migratory 
birds, fish, threatened and endangered species and a diverse assortment 
of other species and related habitats.
  I am very pleased that this bill gives ecosystem restoration the 
attention that it deserves.
  The Department of Transportation projects that water transportation 
will play an increasing role in moving freight due to congestion on 
roads and railways. More efficient use of river transportation will 
help the environment reducing traffic congestion and emissions on our 
Nation's highways. For example, a 15 barge tow can carry as much as 870 
semi-tractor trailer trucks. Fuel efficiency for barge transportation 
is 2.5 times that of rail transport and nearly 10 times that of truck 
transport.
  Improving navigation efficiency on the upper Mississippi and Illinois 
Rivers has been a high priority issue for Midwest farmers for years. 
Our agricultural competitive position in accessing world markets is 
greatly impacted by the efficiency of our transportation system. 
Farmers depend on the lock system to move grain efficiently to market. 
They also depend on the locks for the movement of crop production 
inputs up the Mississippi River.
  Our entire region benefits as commercial barge traffic moves not only 
agricultural products, but also aggregate, cement, salt, and other 
important items efficiently, safely and in an environmentally sound 
manner.
  The Upper Mississippi River Ecosystem Restoration and navigation bill 
also represents a landmark opportunity to address environmental and 
economic ramifications of the entire lock and dam system, rather than 
the previous piecemeal approaches. The Corps of Engineers has responded 
to critics who called for a comprehensive evaluation, coupling an 
assessment of the economic need for navigation improvements and the 
ecosystem restoration components necessary to protect our region in the 
process. As outlined in this legislation, the $1.46 billion ecosystem 
restoration package includes the construction of fish passages, 
floodplain restoration on thousands of acres and side channel 
restoration, along with other measures.
  This is indeed a new approach to improving our economy, by providing 
construction jobs and boosting our farm economy, and protecting our 
environment, by increasing the efficiency of barge traffic while 
initiating important water quality measures.
  I am proud to be a coauthor of this important legislation.
  Mr. FITZGERALD. Mr. President, I rise today with Senator Bond in 
support of a bill to put into place recommendations by the Army Corps 
of Engineers for navigation capacity improvements and ecosystem 
restoration for the Upper Mississippi and Illinois Rivers Waterway 
System.
  Modernizing the inland waterway transportation system is a high 
priority for the Upper Mississippi River basin and for agricultural, 
commercial, and labor interests that rely on the river to transport 
their products. Without modernization, Midwest producers will not be 
able to fully participate in growing world markets.
  On April 29, 2004, the Army Corps of Engineers released its proposal 
to upgrade the locks and to provide for ecosystem restoration on these 
two waterways. I have consistently fought for funding to revitalize 
these locks to help Illinois producers more easily transport their 
products to market. I have joined Senator Bond as a cosponsor to this 
bill because our country's agriculture and business interests have 
waited far too long for these improvements.
  The Mississippi River plays a vital role in our economy. The 
Mississippi and Illinois Rivers are two of the major routes by which 
Illinois agricultural commodities are distributed to the world. In 
fact, roughly 70 percent of U.S. agricultural products are transported 
through the Mississippi River system. More than 60 million tons of 
commodities are transported on the Illinois River alone, including more 
than half of Illinois' annual corn crop.
  By controlling the water's flow, locks and dams help facilitate the 
transportation of commodities along rivers. The outdated and 
deteriorating 600-foot locks on the Mississippi and Illinois Rivers 
create unnecessary delays because the locks are too small to 
accommodate modern size barge tows. This causes transportation costs to 
rise and results in lost market share for Illinois agriculture 
producers.
  Along with modernizing this river system's locks, we must not allow 
the deterioration of its ecosystem. A cooperative solution can meet the 
needs of waterway users and, at the same time, improve the environment 
and stem the decline of the Mississippi and Illinois Rivers' 
ecosystems. This legislation strikes a good balance by upgrading the 
lock system while protecting the ecosystem of these rivers.
  I commend Senator Bond for introducing this important legislation and 
am pleased to join him in cosponsoring this bill. Illinois farmers and 
other producers have waited far too long for these improvements. This 
bill brings

[[Page 10573]]

the Upper Mississippi and Illinois Rivers Waterway System into the 21st 
century.
                                 ______
                                 
      By Mr. NELSON of Florida:
  S. 2472. A bill to require that notices to consumers of health and 
financial services include information on the outsourcing of sensitive 
personal information abroad, to require relevant Federal agencies to 
prescribe regulations to ensure the privacy and security of sensitive 
personal information outsourced abroad, to establish requirements for 
foreign call centers, and for other purposes; to the Committee on the 
Judiciary.
  Mr. NELSON of Florida. Mr. President, I rise today to express my deep 
concern about an issue that illustrates the continuing erosion of 
Americans' privacy rights. My concern is related to the practice of 
outsourcing. When U.S. companies outsource sensitive customer 
information for processing overseas, they may be outsourcing our 
privacy rights along with it.
  We all know that recently it has become popular for American 
companies to send internal paperwork to be done in other countries, by 
foreign companies.
  When a U.S. company allows a foreign company to process customer 
data, the foreign company may be given access to the most sensitive 
types of customer information. Our health records, bank account 
numbers, social security numbers, tax forms, and credit card numbers 
are now being shipped abroad--without the knowledge of the customer and 
beyond the reach of U.S. privacy laws.
  This phenomenon means that consumers are almost powerless to stop 
foreign scam artists from misusing their sensitive information. What 
types of abuses can occur under this scenario?
  In one recent shocking example, a U.S. hospital hired a medical 
transcriber in Pakistan through a subcontractor to work with sensitive 
patient health information. Later, the foreign worker claimed that she 
had not been paid for her work.
   So, you know what she did? She threatened to post patients' medical 
records online unless she was paid. Luckily, she got her paycheck and 
doesn't seem to have posted anything online.
   But this situation shows us the potential for gross violations of 
consumer privacy. The U.S. hospital said that it never even knew that 
the foreign transcriber had been hired through a subcontractor and it 
therefore had never bound her contractually to follow any privacy or 
security standards.
   Another potential abuse of offshoring sensitive customer data is 
identity theft. The illegal theft of someone's identity is a profoundly 
disturbing and costly problem in this information age.
   Moreover, illegal misuse of sensitive information also can have 
national security implications. For example, data about some of our 
Nation's power grids allegedly has been outsourced to companies 
overseas. Imagine the harm that terrorists might do if they got hold of 
that type of confidential information.
   As our global economy expands at such a rapid pace, we simply cannot 
tolerate the outsourcing of American's privacy rights overseas. We need 
to be proactive on this potentially explosive issue. Make no mistake, 
the Pakistani transcriber incident is not the first or the last time 
that sensitive customer information becomes endangered in a foreign 
country. The time to act is now, instead of reacting only after our 
privacy rights are further eroded.
   In light of these circumstances, today I am introducing a bill--
along with Senator Feinstein--that begins to address these privacy and 
security concerns. The bill is called the INFO Act, which is short for 
The Increasing Notice of Foreign Outsourcing Act.
   The INFO Act is designed to help ensure that sensitive consumer 
information is protected and that U.S. companies can be held 
accountable for breakdowns in the security of customer information.
   Specifically, the INFO Act that we are introducing today would 
require the following things: First, U.S. companies in the health care 
industry and the financial industry must tell their customers that 
their sensitive health information and financial information is being 
processed by companies in foreign nations, where privacy safeguards may 
be less stringent.
   Second, U.S. companies in the health care industry and the financial 
industry must promise their customers that they are complying with U.S. 
privacy laws, which are designed to keep sensitive customer information 
secure even when it is outsourced.
   Third, U.S. companies in the health care industry and financial 
industry must make sure that each foreign company that is handling 
sensitive customer information has agreed by contract to meet U.S. 
privacy standards and to keep sensitive customer information secure.
  Fourth, U.S. companies may examine the business operations of the 
foreign company to make sure the foreign company is meeting privacy 
standards and is keeping sensitive customer information secure.
  Fifth, a foreign company must notify the U.S company of any data 
security breach. The U.S. company must then notify the U.S. regulatory 
agency, which can then hold the U.S. company accountable for the 
actions of the foreign company.
  Finally, an employee of a foreign call center must tell a U.S. 
customer where the employee is located, if the U.S. customer asks for 
this information.
  I strongly believe that we need to act now, before the privacy issues 
raised by offshoring begin to explode.
  Let me emphasize that I see this bill as both pro-consumer and pro-
business. Consumers will be informed about how their sensitive 
information is handled and they can learn when security breaches occur. 
Additionally, foreign companies that handle customer data will be held 
accountable to the U.S. company that gives them their work. And U.S. 
companies will be upfront in informing their customers about offshoring 
sensitive data before customer backlash occurs.
  With this sort of system in place, we hopefully can reduce the 
chances of customer data being misused, and allow U.S. companies to 
play on a level playing field where all interested parties know the 
rules of the game.
  I have a history of trying to solve consumer issues in ways that are 
not needlessly burdensome to U.S. businesses. That is why my office, as 
well as Senator Feinstein's office, has met several times with industry 
representatives during the development of this bill.
  I was interested to find ways for businesses to protect consumer 
privacy rights without having to sharply raise prices or limit products 
and services. I believe that the INFO Act has achieved those goals.
  Consumer privacy has always been one of my top priorities. Now, as 
always, I look forward to working with all interested parties to 
resolve this consumer privacy issue in a timely and effective manner.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2472

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Increasing Notice of Foreign 
     Outsourcing Act''.

     SEC. 2. HEALTH PRIVACY.

       (a) Foreign-Based Business Associate.--In this section, the 
     term ``foreign-based business associate'' means a business 
     associate, as defined under the regulations promulgated 
     pursuant to section 264(c) of the Health Insurance 
     Portability and Accountability Act of 1996 (42 U.S.C. 1320d-2 
     note), whose operation is based outside the United States and 
     that receives protected health information and processes such 
     information outside the United States.
       (b) Notices.--
       (1) In general.--The Secretary of Health and Human Services 
     (referred to in this section as the ``Secretary'') shall 
     revise the regulations prescribed pursuant to section 264(c) 
     of the Health Insurance Portability and Accountability Act of 
     1996 (42 U.S.C. 1320d-2 note) to require a covered entity (as 
     defined under such regulations and referred to in this 
     section as a ``covered entity''), that

[[Page 10574]]

     outsources protected health information (as defined under 
     such regulations and referred to in this section as 
     ``protected health information''), outside the United States 
     to include in such entity's notice of privacy protections the 
     following:
       (A) The following information in simple language:
       (i) Notification that the covered entity outsources 
     protected health information to foreign-based business 
     associates.
       (ii) Any risks and consequences to the privacy and security 
     of protected health information that arise as a result of the 
     processing of such information outside the United States.
       (iii) Additional measures the covered entity is taking to 
     protect the protected health information outsourced for 
     processing outside the United States.
       (B) A certification that the covered entity has taken 
     reasonable steps to ensure that the handling of protected 
     health information will be done in compliance with applicable 
     laws in all instances where protected health information is 
     processed outside the United States, including the reasons 
     for the certification.
       (2) Effective date.--A covered entity shall be required to 
     include in such entity's notice of privacy protections the 
     information and certification described in paragraph (1) for 
     notices issued on or after the date on which the Secretary 
     prescribes regulations pursuant to this section or the date 
     that is 365 days after the date of enactment of this Act, 
     whichever date is earlier. Nothing in this subsection shall 
     be construed to require a covered entity to reissue notices 
     issued before the date on which the Secretary prescribes 
     regulations pursuant to this section or the date that is 365 
     days after the date of enactment of this Act, whichever date 
     is earlier, to include in such notices the information and 
     certification described in paragraph (1).
       (c) Rulemaking.--
       (1) In general.--
       (A) Regulatory authority.--The Secretary shall--
       (i) prescribe such regulations consistent with paragraph 
     (2) as may be necessary to carry out this section with 
     respect to foreign outsourcing; and
       (ii) determine the appropriate penalties to impose upon a 
     covered entity for a violation of a provision of this 
     subsection or subsection (b).
       (B) Procedures and deadlines.--The regulations described in 
     subparagraph (A) shall be prescribed in accordance with all 
     applicable legal requirements and shall be issued in final 
     form not later than 365 days after the date of enactment of 
     this Act.
       (2) Necessary regulations.--The Secretary shall prescribe 
     regulations--
       (A) requiring that a contract between a covered entity and 
     such entity's foreign-based business associate contain a 
     provision that provides such entity with the right to audit 
     such associate, as needed, to monitor performance under the 
     contract; and
       (B) requiring that foreign-based business associates and 
     subcontractors of covered entities be contractually bound by 
     Federal privacy standards and security safeguards.
       (d) Breach of Security.--
       (1) Breach of security of the system.--In this subsection, 
     the term ``breach of security of the system''--
       (A) means the compromise of the security, confidentiality, 
     or integrity of computerized data that results in, or there 
     is a reasonable basis to conclude has resulted in, the 
     unauthorized acquisition of and access to protected health 
     information maintained by the covered entity, foreign-based 
     business associate, or subcontractor; and
       (B) does not include good faith acquisition of protected 
     health information by an employee or agent of the covered 
     entity, foreign-based business associate, or subcontractor 
     for the purposes of the entity, associate, or subcontractor, 
     if the protected health information is not used or subject to 
     further unauthorized disclosure.
       (2) Database security.--
       (A) Covered entity.--A covered entity--
       (i) that owns or licenses electronic data containing 
     protected health information shall, following the discovery 
     of a breach of security of the system containing such data, 
     notify the Secretary of such breach; or
       (ii) that receives a notification under subparagraph (B) of 
     a breach, shall notify the Secretary of such breach.
       (B) Other parties.--
       (i) Third party.--The Secretary shall require that a 
     contract between a covered entity and such entity's foreign-
     based business associate contain a provision that if the 
     foreign-based business associate (or any subcontractor of 
     such associate) owns or licenses electronic data containing 
     protected health information that was provided to the 
     associate through the covered entity, the associate (or 
     subcontractor) shall, following the discovery of a breach of 
     security of the system containing such data--

       (I) notify the entity from which it received the protected 
     health information of such breach; and
       (II) provide a description to the entity from which it 
     received the protected health information of any corrective 
     actions taken to guard against future security breaches.

       (ii) Notification process.--Each entity that receives a 
     notification under clause (i) shall notify the entity from 
     which it received the protected health information of such 
     breach until the notification reaches the foreign-based 
     business associate who shall, in turn, notify the covered 
     entity of such breach.
       (C) Timeliness of notification.--All notifications required 
     under subparagraphs (A) and (B) shall be made as expediently 
     as possible and without unreasonable delay following--
       (i) the discovery of a breach of security of the system; 
     and
       (ii) any measures necessary to determine the scope of the 
     breach, prevent further disclosures, and restore the 
     reasonable integrity of the data system.
       (3) Effective date.--This subsection shall take effect on 
     the expiration of the date that is 365 days after the date of 
     enactment of this subsection.

     SEC. 3. FINANCIAL PRIVACY.

       (a) Foreign-Based Business.--Section 509 of the Gramm-
     Leach-Bliley Act (15 U.S.C. 6809) is amended by adding at the 
     end the following:
       ``(12) Foreign-based business.--The term `foreign-based 
     business' means a nonaffiliated third party whose operation 
     is based outside the United States and that receives 
     nonpublic personal information and processes such information 
     outside the United States.''.
       (b) Financial Notices.--
       (1) In general.--Section 503(b) of the Gramm-Leach-Bliley 
     Act (15 U.S.C. 6803(b)) is amended--
       (A) in paragraph (3), by striking ``and'' after the 
     semicolon;
       (B) in paragraph (4), by striking the period at the end and 
     inserting ``; and''; and
       (C) by adding at the end the following:
       ``(5) if the financial institution outsources nonpublic 
     personal information outside the United States--
       ``(A) information informing the consumer in simple 
     language--
       ``(i) that the financial institution outsources nonpublic 
     personal information to foreign-based businesses;
       ``(ii) of any risks and consequences to the privacy and 
     security of an individual's nonpublic personal information 
     that arise as a result of the processing of such information 
     outside the United States; and
       ``(iii) of the additional measures the financial 
     institution is taking to protect the nonpublic personal 
     information outsourced for processing outside the United 
     States; and
       ``(B) a certification that the financial institution has 
     taken reasonable steps to ensure that the handling of 
     nonpublic personal information will be done in compliance 
     with applicable laws in all instances where nonpublic 
     personal information is processed outside the United States, 
     including the reasons for the certification.''.
       (2) Effective date.--A financial institution shall include 
     in such institution's disclosure the information and 
     certification described in the amendment made by paragraph 
     (1)(C) for disclosures provided on or after the date on which 
     the regulatory agency that has jurisdiction over such 
     institution pursuant to section 505 of the Gramm-Leach-Bliley 
     Act (15 U.S.C. 6805) prescribes regulations pursuant to the 
     amendments made by this section or the date that is 365 days 
     after the date of enactment of this Act, whichever date is 
     earlier. Nothing in this subsection, or the amendments made 
     by this subsection, shall be construed to require a financial 
     institution to reissue disclosures provided before the date 
     on which the regulatory agency that has jurisdiction over 
     such institution pursuant to section 505 of the Gramm-Leach-
     Bliley Act (15 U.S.C. 6805) prescribes regulations pursuant 
     to the amendments made by this section or the date that is 
     365 days after the date of enactment of this Act, whichever 
     date is earlier, to include in such disclosures the 
     information and certification described in the amendment made 
     by paragraph (1)(C).
       (c) Rulemaking.--Section 504 of the Gramm-Leach-Bliley Act 
     (15 U.S.C. 6804) is amended by adding at the end the 
     following:
       ``(c) Rulemaking on Foreign Out-
     sourcing.--
       ``(1) In general.--
       ``(A) Regulatory authority.--The Federal banking agencies, 
     the National Credit Union Administration, the Secretary of 
     the Treasury, the Securities and Exchange Commission, and the 
     Federal Trade Commission (referred to in this subsection as 
     the `regulatory agencies') shall--
       ``(i) prescribe such regulations consistent with paragraph 
     (2) as may be necessary to carry out this subtitle with 
     respect to foreign outsourcing, with respect to the financial 
     institutions subject to their jurisdiction under section 505; 
     and
       ``(ii) determine the appropriate penalties to impose upon 
     financial institutions for a violation of a provision of this 
     subsection.
       ``(B) Coordination, consistency, and comparability.--The 
     regulatory agencies shall consult and coordinate with each 
     other for the purposes of assuring, to the extent possible, 
     that the regulations prescribed by each such agency are 
     consistent and comparable with the regulations prescribed by 
     the other such agencies.
       ``(C) Procedures and deadlines.--The regulations described 
     in subparagraph (A) shall

[[Page 10575]]

     be prescribed in accordance with all applicable legal 
     requirements and shall be issued in final form not later than 
     365 days after the date of enactment of this subsection.
       ``(2) Necessary regulations.--The regulatory agencies shall 
     prescribe regulations--
       ``(A) requiring that a contract between a financial 
     institution and such institution's foreign-based business 
     contain a provision that provides such institution with the 
     right to audit such business, as needed, to monitor 
     performance under the contract; and
       ``(B) requiring that foreign-based businesses and 
     subcontractors of financial institutions be contractually 
     bound by Federal privacy standards and security 
     safeguards.''.
       (d) Breach of Security.--Section 502 of the Gramm-Leach-
     Bliley Act (15 U.S.C. 6802) is amended by adding at the end 
     the following:
       ``(f) Breach of Security.--
       ``(1) Breach of security of the system.--In this 
     subsection, the term `breach of security of the system'--
       ``(A) means the compromise of the security, 
     confidentiality, or integrity of computerized data that 
     results in, or there is a reasonable basis to conclude has 
     resulted in, the unauthorized acquisition of and access to 
     nonpublic personal information maintained by the financial 
     institution, foreign-based business, or subcontractor; and
       ``(B) does not include good faith acquisition of nonpublic 
     personal information by an employee or agent of the financial 
     institution, foreign-based business, or subcontractor for the 
     purposes of the institution, business, or subcontractor, if 
     the nonpublic personal information is not used or subject to 
     further unauthorized disclosure.
       ``(2) Database security.--
       ``(A) Financial institution.--A financial institution--
       ``(i) that owns or licenses electronic data containing 
     nonpublic personal information shall, following the discovery 
     of a breach of security of the system containing such data, 
     notify the entity under which the institution is subject to 
     jurisdiction under section 505 of such breach; or
       ``(ii) that receives a notification under subparagraph (B) 
     of a breach, shall notify the entity under which the 
     institution is subject to jurisdiction under section 505 of 
     such breach.
       ``(B) Other parties.--
       ``(i) In general.--The Federal banking agencies, the 
     National Credit Union Administration, the Secretary of the 
     Treasury, the Securities and Exchange Commission, and the 
     Federal Trade Commission shall require, with respect to the 
     financial institutions subject to their jurisdiction under 
     section 505, that a contract between a financial institution 
     and such institution's foreign-based business contain a 
     provision that if the foreign-based business (or any 
     subcontractor of such business) owns or licenses electronic 
     data containing nonpublic personal information that was 
     provided to the business through the financial institution, 
     the business (or subcontractor) shall, following the 
     discovery of a breach of security of the system containing 
     such data--

       ``(I) notify the entity from which it received the 
     nonpublic personal information of such breach; and
       ``(II) provide a description to the entity from which it 
     received the nonpublic personal information of any corrective 
     actions taken to guard against future security breaches.

       ``(ii) Notification process.--Each entity that receives a 
     notification under clause (i) shall notify the entity from 
     which it received the nonpublic personal information of such 
     breach until the notification reaches the foreign-based 
     business who shall, in turn, notify the financial institution 
     of such breach.
       ``(C) Timeliness of notification.--All notifications 
     required under subparagraphs (A) and (B) shall be made as 
     expediently as possible and without unreasonable delay 
     following--
       ``(i) the discovery of a breach of security of the system; 
     and
       ``(ii) any measures necessary to determine the scope of the 
     breach, prevent further disclosures, and restore the 
     reasonable integrity of the data system.
       ``(3) Effective date.--This subsection shall take effect on 
     the expiration of the date that is 365 days after the date of 
     enactment of this subsection.''.

     SEC. 4. FOREIGN CALL CENTERS.

       (a) Foreign Call Center Defined.--In this section, the term 
     ``foreign call center'' means a foreign-based service 
     provider or a foreign-based subcontractor of such provider 
     that--
       (1) is unaffiliated with the entity that utilizes such 
     provider or subcontractor; and
       (2) provides customer-based service and sales or technical 
     assistance and expertise to individuals located in the United 
     States via the telephone, the Internet, or other 
     telecommunications and information technology.
       (b) Requirement.--A contract between a foreign call center 
     and an entity that utilizes such foreign call center to 
     initiate telephone calls to, or receive telephone calls from, 
     individuals shall include a requirement that each employee of 
     the foreign call center disclose the physical location of 
     such employee upon the request of such individual.
       (c) Certification Requirement.--An entity described in 
     subsection (b) shall submit an annual certification to the 
     Federal Trade Commission on whether or not the entity and its 
     subsidiaries, and the foreign call center employees and its 
     subsidiaries, have complied with subsection (b). Such annual 
     certifications shall be made available to the public.
       (d) Noncompliance.--An entity described in subsection (b) 
     or its subsidiaries that violates subsection (b) shall be 
     subject to such civil penalties as the Federal Trade 
     Commission prescribes under subsection (e).
       (e) Regulations.--Not later than 365 days after the date of 
     enactment of this Act, the Federal Trade Commission shall 
     prescribe such regulations as are necessary for effective 
     monitoring and compliance with this section. Such regulations 
     shall include appropriate civil penalties for noncompliance 
     with this section.

  Mrs. FEINSTEIN. Mr. President, I rise to introduce, along with my 
colleague, Senator Bill Nelson, the Increasing Notice of Foreign 
Outsourcing Act, or the INFO Act. This legislation will help safeguard 
Americans' most important and sensitive personal information when it is 
sent abroad for processing to countries that may have lax security and 
privacy standards.
  The bill will ensure that American companies notify consumers of a 
business's outsourcing practices. It will require American companies to 
certify the adequacy of their outsourcing protections. And it will 
require American companies to hold their foreign business partners 
accountable for protecting Americans' data.
  In order to protect the information of Americans that is now 
vulnerable abroad, this bill calls for the following key safeguards:
  First, the bill requires American health and financial companies to 
notify consumers when sending their information abroad, and to certify 
the safety of the overseas processing. We drafted provisions carefully 
to minimize the burden on businesses, so they will expand on privacy 
disclosures that companies already make under Federal law.
  Second, American companies processing health or financial data must 
include clauses in contracts with their foreign partners to allow 
audits of their foreign information processors and to enforce American 
privacy standards.
  Third, the bill creates a system to inform American companies and 
Federal regulators of any security breaches involving American health 
or financial information at facilities operated outside the United 
States.
  And fourth, the bill gives Americans the right to have workers at 
foreign call centers disclose where they are calling from.
  The bill also gives Federal agencies the power to enforce these 
provisions. It is important to emphasize that this bill is drafted to 
minimize the burdens on businesses, by expanding on existing privacy 
data and security laws.
  While many are concerned about how outsourcing abroad hurts American 
workers, outsourcing also poses risks to the security and privacy of 
American consumers' personal data. The recent wave of international 
outsourcing means that we are flooding the entire world with our most 
sensitive information.
  Once sent abroad, the information is at risk because our Federal laws 
do not apply to foreign companies operating overseas. Another reason is 
because many foreign countries have far weaker security laws than our 
own. For instance, India still has no laws to protect personal and 
private data. And still another reason is because it is extremely 
difficult for Americans to use foreign courts to sue foreign companies 
that misuse American data.
  These factors leave the most intimate details of the lives of 
uncountable Americans vulnerable to lax security and to malicious 
identity thieves.
  And there is even more at stake. Information outsourcing poses a 
direct risk to national security. We are painfully aware that some 
people want to steal the identity of individual Americans in order to 
evade our homeland defenses and harm us all.
  International information out-
sourcing has skyrocketed in recent years. Consider the following:
  Tax returns for about 200,000 Americans were prepared in India this 
year.

[[Page 10576]]

To put this number in context, India workers processed only about 1,000 
U.S. tax returns 2 years ago. Tax returns have Americans' names, Social 
Security numbers, income, employers, addresses, and other details.
  The American Association of Medical Transcription estimates that 10 
percent of all medical transcription of doctors' notes is being done 
abroad.
  An executive from Trans Union, one of the major credit agencies in 
the United States, told The San Francisco Chronicle that:

       A hundred percent of our mail regarding customer disputes 
     is going to go to India at some point.

  If anyone doubts the risk that international outsourcing poses to 
Americans, consider these incidents:
  Recently, a low-paid transcriber in Pakistan was working as a 
subcontractor to the University of California Medical Center in San 
Francisco. That foreign worker threatened to post confidential patient 
information on the Internet unless the university coaxed her boss into 
paying some of her bills.
  Three weeks later, a strikingly similar incident occurred with a 
worker in Bangalore, India.
  In another incident, in Noida, India, an employee working at a call 
center used an American's credit card information to buy electronics 
equipment from Sony.
  Also in India, there is a burgeoning black market in personal 
identity information. According to one report, stolen names, addresses, 
phone numbers, the bank a person has an account with, and even bank 
account numbers are sold on the streets for mere pennies.
  These are just a few incidents. No one knows how many other times 
workers have done similar things. And that is a big part of the 
problem. It is not merely that Americans' identities are vulnerable 
when sent abroad. The problem is that American companies obscure how 
much outsourcing they do, and when they are doing it.
  For example, according to the San Jose Mercury News, a worker at a 
call center dealing with State benefits refused to identify his 
location. The supervisor, when she picked up the call, refused to say 
anything more than that she worked for Citicorp.
  In essence, the problem of obscurity is so bad that we can list only 
a few incidents reported by the media. How many security breaches have 
taken place? Have consumers been informed when their information is 
abroad and at risk? How much money has this cost consumers? We don't 
know.
  And so far, American regulatory agencies have been unable to say 
despite their oversight of these industries. And American companies 
have stayed mum. We need to break the silence.
  The fact is, our Government is simply not doing enough to protect 
consumers. Earlier this month I received a letter from John D. Hawke, 
Jr., who is the U.S. Comptroller of the Currency. He heads one of the 
agencies that regulates U.S. financial institutions and banks.
  Mr. Hawke wrote to me that the Office of the Comptroller of the 
Currency, known as the OCC, does not directly regulate foreign 
contractors that work for U.S. banks. Specifically, he wrote:

       [T]he OCC focuses its supervisory reviews regarding foreign 
     servicing relationships on whether the serviced banks have 
     adequate procedures in place. . . .

  That means the OCC is focusing on the American companies, not the 
foreign ones.
  I also learned from the OCC that it already suggests certain 
safeguards for American banks to use when they hire foreign information 
processors. The OCC asks U.S. banks to use contract provisions to make 
sure that foreign companies use secure methods to process data, and to 
let the U.S. companies audit the foreign companies.
  But the OCC only suggests that companies adopt these safeguards. The 
legislation we are introducing today would take safeguards like the 
OCC's a step further, and make them mandatory.
  Now is the time to act. We know that there are criminal syndicates, 
such as in Nigeria, that have fraudulently obtained bank information to 
steal untold fortunes. We can hardly imagine the damage such 
organizations can do with a vast new source of sensitive financial data 
from international information outsourcing.
  In short, this bill accomplishes four goals crucial to protecting 
Americans' sensitive data sent abroad. It requires companies to give 
notice that they send consumers' sensitive data abroad. It ensures that 
U.S. companies can audit their foreign partners, and impose U.S. 
privacy standards on them. It establishes a system to ensure that 
foreign and U.S. companies will report security breaches to the U.S. 
Government. And it allows American consumers to demand to know where 
foreign call centers are located.
  This bill helps to protect outsourced information while minimizing 
burdens on American businesses. I urge my colleagues to join us in this 
effort.

                          ____________________